Category: Countries & Regions

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Frau Merkel, it really is a euro crisis – Ambrose Evans-Pritchard

The reason this crisis keeps grinding ever deeper is because the euro itself is a machine for perpetual destruction. The currency is fundamentally warped and misaligned. It spans a 30pc gap in competitiveness between North and South. Intra-EMU current account deficits have become vast, chronic, and corrosive. Monetary Union is inherently poisonous.

The countries in trouble no longer have the policy tools — interest rates, QE, liquidity, and exchange rates — to lift themselves out of debt-deflation. Just as they had few tools to prevent a catastrophic credit bubble during the boom. Their travails were caused in great part by negative real interest rates set by the ECB (irresponsibly) for German needs.

via Frau Merkel, it really is a euro crisis – Telegraph Blogs.

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Euro-Zone Bailout Plan Progresses – WSJ.com

While German officials say they are open in principle to using the EFSF’s limited war chest “as efficiently as possible,” they say these ideas are unlikely to work well unless the ECB cooperates. So far, the ECB has rejected calls to team up with the bailout fund.

Political resistance to such a “leveraging” of the EFSF is high in Germany’s parliament, which would have to approve such a move. Ms. Merkel’s government has tried to reassure its lawmakers this week that it has no plans to make German taxpayers shoulder even bigger risks.

via Euro-Zone Bailout Plan Progresses – WSJ.com.

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Dollar rise as euro falls

The euro is testing short-term support against the greenback at $1.35/1.34. 63-Day Momentum (declining below zero) reminds we are in a primary down-trend. Failure of support would signal a decline to $1.30*.

EURUSD

* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30

The dollar has benefited from safe haven demand, commencing a primary advance as the euro falls. 63-Day Twiggs Momentum crossed to above zero, confirming the primary up-trend. Further retracement to test the new support level at 76.00 is likely, but respect would demonstrate strong buying support.

US Dollar Index

* Target calculation: 76 + ( 76 – 73 ) = 79

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India & Singapore

India’s SENSEX index ran into resistance at 16500 today. 13-Week Twiggs Money Flow holding below zero warns of strong selling pressure. Expect another test of support at 16000. Failure would signal a down-swing to 14500.

SENSEX

* Target calculation: 16000 – ( 17500 – 16000 ) = 14500

The Straits Times Index weakened to 2700 today after yesterday’s sharp rally. 63-Day Twiggs Momentum declining below zero reminds that we are in a strong primary down-trend. Failure of support at 2700 would signal a decline to 2400*.

Straits Times Index

* Target calculation: 2650 – ( 2900 – 2650 ) = 2400

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ASX 200 compressed spring

Narrow range and strong volume signals strong opposition to the current rally. Like the release of a compressed spring, reversal below 4000 would lead to a sharp fall.

ASX 200 Index

* Target calculation: 4000 – ( 4500 – 4000 ) = 3500

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China, Hong Kong continue down-trend

Dow Jones Shanghai Index continued a down-swing Wednesday to test the lower border of its downward trend channel. 21-Day Twiggs Money Flow declining below zero warns of strong selling pressure.

Dow Jones Shanghai Index

The Shanghai Composite index is headed for support at its target of 2350. 63-Day Twiggs Momentum declining below zero reminds that we are in a primary down-trend. Expect some retracement or consolidation at support. Failure would warn of a decline to 2000*.

Shanghai Composite Index

* Target calculation: 2350 – ( 2700 – 2350 ) = 2000

Hang Seng Index found resistance at 18000 on Wednesday after rallying earlier in the week. The primary trend is down and 13-week Twiggs Money Flow (below zero) warns of selling pressure. Resistance at 19000 is expected to hold, followed by down-swing to 16000*.

Hang Seng Index

* Target calculation: 17500 – ( 19000 – 17500 ) = 16000

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S&P warns on Chinese property – macrobusiness.com.au

Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said.

A 30 percent decline in sales may leave many developers facing a liquidity squeeze, S&P said after conducting stress tests of the nation’s real estate companies…..

“The worst isn’t over for China’s real estate developers,” S&P analysts led by Frank Lu wrote in a report today. “Developers are bracing themselves for slower sales and lower property prices ahead.”

via S&P warns on Chinese property – macrobusiness.com.au | macrobusiness.com.au.

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Japan & South Korea

Bullish divergence on Japan’s Nikkei 225 index (13-week Twiggs Money Flow) warns of a bear market rally. Breakout above the upper channel of the broadening wedge pattern would confirm. The primary trend, however, remains downward; breakout below the lower channel at 8400 would warn of a down-swing to 7800*.

Nikkei 225 Index

* Target calculation: 8400 – ( 9000 – 8400 ) = 7800

The Seoul Composite is weaker on Wednesday after a sharp rally earlier in the week. 13-Week Twiggs Money Flow continues to threaten a break below zero. Breakout below the lower border of the broadening wedge formation would signal another primary decline.

Seoul Composite Index

* Target calculation: 1650 – ( 1900 – 1650 ) = 1400

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