Nobel Winner Warns Economic Woes Could Endanger Euro
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Monday, October 4, 2010
, Posted by Usman Ali Minhas at 12:06 PM
The EUR USD is retreating this morning, after an initial surge, on renewed concerns about the impact of the Euro Zone’s sovereign debt woes.
The Euro was up early in the Asian trading session, boosted by week-end remarks by Chinese Premier Wen Jiabao.
Jiabao helped the Euro when he said “We hope that by intensifying cooperation with you, we can be of some help in your endeavor to tide over difficulties at an early date,” Wen said in a speech to the Greek parliament, according to The Wall Street Journal. “China will not reduce its euro-bond holdings and China supports a stable euro.”
This strong endorsement initially underpinned the Euro until Nobel Prize-winning economist, Joseph Stigliz, warned of sovereign debt threats to the stability of the Euro Region, eroding Jiabao’s bullish spin, and forcing investors to once again face the reality of debt problems in Spain, Ireland and other peripheral nations.
In addition to the Stigliz comments, the Euro was weakened by a further rise in Spanish unemployment.
It was reported last night that Stiglitz said in his book “Freefall” that governments around the world may have attempted to cut deficits too quickly, thereby setting up the possibility of a double-dip recession.
He also warned that the Euro Zone may not survive if competitive tensions continue within the region.
The break this morning in the Euro looks as if investors are paring positions as a precaution against a further acceleration in sovereign debt woes. There doesn’t appear to be any structural damage to the up trend, however, a closing price reversal is developing which could translate into a sizeable correction if confirmed.
Normal profit-taking may also be taking place as the Euro edges toward a major Fibonacci level at 1.3896. Besides a reversal top, a break under a major 50% level at 1.3510 will also be a sign that selling pressure is building.
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