Home > Uncategorized > Brief Update: 2010/03/01: Sovereign Debt Worries Back, with More Influence Over Forex than Bonds and Equities

Brief Update: 2010/03/01: Sovereign Debt Worries Back, with More Influence Over Forex than Bonds and Equities

▪ Even though the Greek debt concerns have resurfaced as quickly as we suspected they might (no waiting for some silly 30 day horizon from mid-February), the greater concern seems to be on the UK right now.  And that’s in spite of some additional demands being placed on Greece by EU Economic Affairs Commissioner Olli Rehn. The better mood is because they are seen as achievable (the possibility of a general strike notwithstanding) and in their wake there is likely to be some EU guarantee of a portion of the Greek debt. That in turn is very critical to the success of the planned auction that will buy the requisite time for Greece to more broadly address its ongoing fiscal weakness. The UK on the other hand is viewed as having fiscal problems which are also likely as bad in their way, and is far too large for anyone to guarantee its debts. 

All that said, the equity markets are doing rather well in the wake of some sense that the Greek debt crisis will not spill over into a domino effect for other PIIGS on the periphery of Europe. There has also been some reasonably strong economic news this morning out of the Far East and Europe, as Manufacturing PMI’s remain above 50 even if there was some slippage in the US. All in all, most psychological background and technical trend indications remain as in last Friday’s TrendView GENERAL UPDATE (http://bit.ly/aCKr31.) Therefore we will only be addressing the aspects requiring the most critical immediate updates to background or trend views. In the equities DJIA is still stalled no better than the previously violated 14,423 Tolerance of its Flat-Bottomed Widening Pattern, and March S&P 500 future remains unable to Close above 1,110. However, previous weak sister March NASDAQ 100 future back above 1,782 has also pushed above prominent 1,815-25 resistance, above which it is likely to see 1,850 once again. The question is whether that is an anomaly, or will encourage the DJIA and S&P 500 future to push out through their resistances as well. We shall see.

▪ It is also quite interesting that govvies have reached important resistances (March T-note 119-00, March Bund 124.50 and March Gilt 116.00-.30) after last week’s explosive recovery… 

▪ Which leads us to the most active area this morning, as the British pound has indeed become the weak sister, even when compared to the previously damaged euro. As we noted at the end of last week, GBP/USD below 1.5400 was approaching even more important 1.5250 support that it has now significantly violated as well.  In fact, after slippage below it this morning there is even a question of whether it will hold the next support in the 1.5000-1.4850 area. Much below it interim supports are 1.44 and 1.40, yet with the most major supports back in the mid-1.35 area.

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