Euro – FX (Inc news update – ECB Cuts Bank Reserve Ratios to 1% But Reminds The Beaurocrats that ‘debt monetization impossible’)

As we can see the technical picture is very weak. It looks as the though the technical breakout has failed, the uptrend defeated. We moved to oversold levels in reaction. We have recently had a sideways move to reset the technical oversold conditions. We are at a level whereby technicall selling could/should resume. The entire 18 month uptrend vs the usd looks to be broken and the lows are asking to be tested. Technically the euro should be falling off a cliff here but she isn’t.. why? We must accept world wide intervension on this pair via the world’s central banks. Last week’s intervensions being a case in point providing a massive usd swap line for investment grade assets. This supported the euro but as we see the support is barely enough to hold the line. The euro remains on the ropes for as long as this technical pattern sustains. imo. Generally intervensions in the market extend and pretend rather than changing the course of direction, especially where currencies are concerned. Having said this if the fed bails everyone out in the euro zone then yes the euro can rise vs the usd. Once again the ‘free markets’ are hostage to what these central planners declare. We see the technical weakness in spite of their actions and therefore risks are to the downside for the eurousd.

Just off the wires the ECB, as if to remind all of the catch22 we are in. The ECB 1) extends 3 month (almost interest free loans to the banking sector), 2) Lowers quality of assets against which it will offer new cash loans to the banks 3) Re-affirms no direction debt monetization and no loan to the IMF due to the convenants under which the ECB operates. Summary, Euro banking system insolvent, ECB cannot print under current treaty.

http://www.marketwatch.com/story/draghi-eu-treaty-prohibits-monetary-financing-2011-12-08-922140

http://www.bloomberg.com/news/2011-12-08/draghi-says-ecb-to-lend-banks-more-to-avert-credit-crunch-as-key-rate-cut.html

The Euro solution to a banking crisis caused by the banks holding too little reserves is to lower their reserve requirement. I would laugh if it wasn’t so serious.

Here below the euro vs Cads, Auds, Seks, I hold all vs the euro.