European Bank Exposure to Sovereign Debt Dragging Down EUR/USD

EURUSD is at 1.43125, down 0.38% at 3:25am (eastern). It is continuing its descent from Tuesday after breaking through the initial uptrend line. It is now testing the second one as you can see. To be long EUR/USD I need to see a confirmed breakout above 1.453. Until then, a break below the second trend line (around 1.430) could be a decent short to test the major uptrend line from 2010. There are fears that European banks have to take large writedowns on their holdings of Greek, Italian, Irish, Spanish and Portuguese sovereign debt, and a contagion effect could make it even worse. Read the FT article for details. The ECB and European governments think their estimates are BS since they're not factoring in the rise in German debt. The market will decide... Will China step in here?



"IMF and eurozone clash over estimates" (Financial Times)
"International Monetary Fund staff have provoked a fierce dispute with eurozone authorities by circulating estimates showing serious damage to European banks’ balance sheets from their holdings of troubled eurozone sovereign debt."
"Peeling the Onion on the Accounting for Greek Bonds" - (Accounting Onion Blog) *similar article, hat tip Zero Hedge

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