The pound, affected by euro fallout, broke support at $1.59 to signal a primary down-trend. Expect a test of its December 2010 low at $1.53*
* Target calculation: 1.60 – ( 1.67 – 1.60 ) = 1.53
Euro sinks
The euro found short-term support at $1.35 against the greenback but is now weakening. Failure of support would confirm the target of $1.30*. A peak below zero on the 63-day Momentum oscillator would confirm the primary down-trend.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
Europe Is Urged to Take Bolder Action on Debt – NYTimes.com
“China is a poor country with only $4,000 per capita income,” Yu Yongding, a Chinese top economist and former member of the central bank’s monetary policy committee said in an interview in China. “To talk and think about China to rescue countries with $40,000 per capita incomes is ridiculous.”
China is ready to help, Mr. Yu said, “but European countries first should show that they have a clear road map and convincing policies to preserve the euro and solve their problems as well as the political will to make necessary sacrifices.”
via Europe Is Urged to Take Bolder Action on Debt – NYTimes.com.
Europe breaks support
DJ Europe Index broke support at 225, signaling another down-swing to the 2010 low at 205. The calculated target is lower at 195.
* Target calculation: 230 – ( 265 – 230 ) = 195
European indices warn of another down-swing
The German DAX Index broke support at 5500 to warn of a down-swing to 4500*. Declining 13-week Twiggs Money Flow below zero indicates strong selling pressure.
* Target calculation: 5500 – ( 6500 – 5500 ) = 4500
In France, the CAC-40 Index reversed below support at 3000, led by a sell-off in French banks. Expect support at the 2009 low of 2500, though the calculated target is even lower. 13-Week Twiggs Money Flow again signals strong selling pressure.
* Target calculation: 3000 – ( 3700 – 3000 ) = 2300
The FTSE 100 is consolidating above 5000, but is likely to be dragged lower if major European trading partners fall. Breach of support would offer a target of 4400*.
* Target calculation: 5000 – ( 5600 – 5000 ) = 4400
Woes at French Banks Signal a Broader Crisis – WSJ.com
Greece will run out of money within weeks if it can’t end a standoff with the International Monetary Fund and the EU. In a last-ditch effort to overcome the impasse with its international lenders, Greece’s government said Sunday that it would impose a new property tax to cover a €2 billion shortfall in budget targets this year. Investors worry that if the dispute goes unresolved, Greece could suffer a messy default, with untold consequences for Europe’s banks.
French banks’ overall exposure to Greece is about €65 billion, according to the Bank of International Settlements.
Good time to buy gold
With Europe awash with stories of the imminent default of Greece, and German banks told to prepare for a 50% haircut on Greek bonds [Bloomberg], this would be a good time to buy gold. Any rupture in current bailout arrangements would cause a flight to safety, driving Treasury yields even lower and gold even higher. Breakout above $1900 would confirm a fresh advance, with a target of 2100*.
* Target calculation: 1900 + ( 1900 – 1700 ) = 2100
Added in response to question: Reversal below 1800 is unlikely but would warn that the ascending triangle formation has failed.
Europe on the Verge of a Political Breakdown – Barry Eichengreen – Project Syndicate
Europe doesn’t have months, much less years, to resolve its crisis. At this point, it has only days to avert the worst. It is critical that leaders distinguish what must be done now from what can be left for later.
The first urgent task is for Europe to bulletproof its banks. Doubts about their stability are at the center of the storm. It is no coincidence that bank stocks were hit hardest in the recent financial crash.
via Europe on the Verge of a Political Breakdown – Barry Eichengreen – Project Syndicate.
European stocks threaten breakout
DJ Europe Index ($E1DOW) reversed below 230, threatening another down-swing — with a target of 200. Twiggs Momentum oscillating below zero indicates a primary down-trend. Follow-through below 225 would confirm the bear signal.
* Target calculation: 230 – ( 270 – 230 ) = 190
Euro breaks support at $1.40
The euro broke support at $1.40 after a descending triangle lasting several months. Breakout was most likely precipitated by the resignation of Jurgen Stark from the ECB. Target for the breakout is $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30