The very day before European leaders are expected to come to any conclusions, Euro flounders.
It never seems to fail…..the weeks leading into an event of this magnitude are filled with hopes of a positive outcome. The second details started being reported about the EU summit, what's attempted to be done and when, Euro takes off, leaving no prisoners. Alongside Euro are other higher yielding currencies and overall risk appetite across various asset classes. Equity buyers come back to life and for a while, everything seems hunky dory.
….and then the day before any conclusions are to be drawn, short term stagnation or failure……and there always seems to be stagnation, supported by negative news to support a pull in the opposite direction. I mentioned this briefly in my post over the weekend (second to last paragraph https://paracurve.com/2011/10/wednesday.html)
Today's chunk of news came in the form of the following:
comments from Fitch that a Greek default was inevitable
and then, courtesy of Merkel,
said that Germany is opposed to a phrase in the draft EU summit that calls for support for continued ECB non-standard measures (bye bye optimism)
…..and then EUR/USD retracts to “close the gap”, once it does, begins to fade again
UK says there will be no EcoFin meeting on Wednesday
EU leaders' summits will take place tomorrow according to the UK
….and most recently,
Greek parliament gives final approval on austerity bill
Take these into account, and you have a swing range for the day with a high of 1.3952 and a low of 1.3850, with the public left speculating over what the ultimate outcome of this summit will be.
In terms of simplifying all of this, I'm reverting back to the opening paragraphs:
You have hope, day prior, you have your stagnation.
If you sit back and think: we're in a hyperzone of buying over nothing but hope, but when this hope isn't complimented with extreme success (as extreme as the buying) you're at least going to stagnate.
EUR/USD popped off of a spike base in the 1.3938-60 range, as usual, acting as a magnet zone for countertrend order flow.
ECB bond buying is getting old and good old fashioned “roll up your sleeves and put your country to work” mentality is really the best solution for the entirety of this planet, but for the nations drowning and debt where this isn't an immediate option, there can only be a few. More injection of capital, more safety nets to keep a band-aid on the situation and smearing bad paper across the rest of the Eurozone.
Tomorrow's activity, again, is going to be contingent on how high these leaders want to roll up their sleeves in order to get things done. There's no sense in speculating over what the ultimate outcome will be other than for entertainment, so I won't waste my breath.