Short Term Fix

The EUR did well in early trading on Tuesday. In the States, Wall Street started off with good momentum and the markets flourished. However, as the trading day came to an end mixed pronouncements started coming from the E.U. once again as some of their latest proposals to formulate a safety net for Greece and related financial institutions began to run into open disagreement. The debate is now centering on how much large investors and banks will have to be responsible for ‘haircuts on terms’ if and when a ‘debt forgiveness’ program is enacted. Upon this news the EUR began to show some vulnerability and began to drift back into range against the USD. The GBP did manage to gain against the USD and keep most of its gains as the day came to an end. The GBP has shown some divergence with the EUR in the past week and traders should monitor the EUR/GBP pair closely.

The U.S. saw the CB Consumer Confidence reading on Tuesday and it came in below expectations with a reading of 45.4 compared to the anticipated result of 46.2. Today Core Durable Goods Orders data will be presented from the States and it carries a projected gain of only 0.1%. Crude Oil Inventories will also be published. Tomorrow the U.S. will release three key reports including weekly Unemployment Claims, Pending Home Sales, and Final GDP numbers. The combination of these economic glimpses could have an impact on the broad markets. Although shares on the major indexes gained in a nice fashion yesterday it remains to be seen what type of staying power Wall Street has. If economic data should cascade in a negative manner it could set off further erosion in equities. The USD continues to get plenty of attention and receive backing from some analysts who have not been its biggest fans. Even as the U.S. economy shows real signs of struggling, investors who are traditionalists have been drawn to the Greenback as a safe haven.

The EUR still has large questions surrounding its overall health. Proposals by the E.U. may constitute a mechanism that will create stability, but the fear that some investors have is that the proposals may prove only a quick fix and not a long term solution. Germany will present inflation data today and tomorrow its Unemployment Change numbers will be released. However, the source for nearly all sentiment being generated from Europe remains the Sovereign Debt dynamic.

The GBP as pointed out above did well yesterday and is showing a bit of a divergence from the EUR. The BoE Credit Conditions Survey will be published today and tomorrow the Nationwide HPI appears to have a firm release date. Economic conditions remain difficult in the U.K. and growth remains extremely challenging to attain. The GBP is likely to feel the shadow coming from Europe for the foreseeable future and traders will find opportunities with the Sterling if they choose wisely.

The AUD did gain slightly on Tuesday but not with any great momentum considering its downward trend the past few weeks. The JPY languishes in its range bound movement which is well known by investors. Gold as of this morning is around 1636.00 USD an ounce and must be watched carefully. Plenty of debate surrounds the value of the precious metal and fireworks are likely to still be seen.

Forex conditions continue to remain cautious because of the questions surrounding the E.U. debt saga and this is still generating volatility in the broad markets. Equities and Commodities could see interesting trading as the combination of Forex conditions and overall sentiment remains on a razor’s edge.