Chart: EUR/USD Sitting On Uptrend Waiting On EFSF Decision

EUR/USD at uptrend + ceiling intersection (freestockcharts.com)
EUR/USD, up 0.03% at 1.39280, is sitting on a steep uptrend line from the October low (as is the S&P), and waiting on the EFSF catalyst to make its next move. As noted on my charts, if EUR/USD reverses sharply and breaks through that steep trend line and the recent highs, it could see a decent retracement to the downside (imo). Overhead resistance is around 1.40, which took five long months to break if you remember, so EUR/USD is at a critical intersection.

Today, the EU summit meetings in Brussels and the German parliament vote will decide the fate of the proposed leveraged EFSF plan (European Financial Stability Facility), and will probably be the catalysts that directionalize the euro and equities. It's a pretty complex plan, and I'm still trying to figure it all out, so I'll refer you to a bunch of articles below for more information. The plan essentially involves the EU, IMF, other countries, sovereign wealth funds and private financial institutions (via Special Purpose Investment Vehicles) throwing money at distressed (toxic) sovereign debt and banks in the eurozone to prevent a major financial crisis. The EFSF, which is funded by EU member states (the majority by Aaa rated France and Germany), would backstop a portion of the losses. That's why the 10-year French-German yield spread hit a 20 year high last week and Moody's put France's "stable outlook" on review. But to make it all worse, should Greece or another country default, there are credit default swaps written on Greek debt with counterparty risk, similar to 2008.




Greenspan: Why European Union Is Doomed to Fail (CNBC Video)
Euro Investment Vehicle 'Giant Sub-Prime CDO' (CNBC)
Satyajit Das: Euro-Zone’s Leveraged Solution to Leverage (Naked Capitalism)
Merkel Puts Rescue Fund to Vote Before EU Crisis Summit (SF Gate)
Europe Struggles for Crisis Cure Ahead of Summit (Bloomberg)
Ferguson Says ECB to `Print Its Way Out of the Crisis' (Bloomberg Video)
Rescue plan could take weeks to fund, draft warns (Irish Times)
Brussels summit: the main issues to be resolved (Telegraph)
German Lawmakers Set To Back EFSF (WSJ)
Hard line adopted on Greek debt loss (FT)
Merkel Gambles on Parliamentary Support for Euro Backstop (Spiegel)
Europe Readies Its Rescue Bazooka (Naked Capitalism)
Annotated European Union Document On EFSF Status (Zero Hedge)
Italy steps closer to meeting EU demands with pension compromise (Deutsche-Welle)
Euro Backstop to Be Leveraged to One Trillion Euros (Spiegel)

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