EurAnalysis

hi foto, all 17 euro nations have invested in the euro - some would argue that Germany has invested more than most. I believe the the relationship between the two is now symbiotic in nature.

If Germany were to leave and revert to the DM, they would have the same problems as the Swiss - the DM would be far to strong to sustain an export driven economy. Their banks would also face the prospect of defaults and further write-downs from some or all of the PIIGS.

With regard to EUR/USD price, I agree it does look as if the euro will fall early next week (possibly as low as 3040-50 range).... it will be interesting to see the volumes and PA on Tuesday. The vols on thu/fri were relatively low.

If the US payroll numbers next week are disappointing then I think we could see a sharp retracement - again it will be very interesting to keep an eye on volumes and daily spreads next week....

just my two cents,

The problems are solved. Thanks Angela.

http://www.reuters.com/article/2011/...7AQ00F20111127

One of the best I read on this topic.

http://www.hindecapital.com/docs/hil...ingularity.pdf

a chilling, concise, easy-to-understand Q and A about the greek situation and its effect on GERMANY.

Well, them's the breaks.

But it puts Greece into a death spiral. They can't pay their debts, so they cut back, which hurts their economy, which makes them even broker, so they cut back some more, rinse and repeat. There's virtually no hope that they'll recover anytime in the near future. It's just endless pain. What they need is total debt forgiveness and lots of aid going forward.


That doesn't sound like a very attractive option for the rest of Europe.

No, it's not.


So maybe they should just let Greece default and wash their hands of them.

Here's the thing, though: Greek debt is largely held by German banks that made the loans. [See update below.] If Greece has been irresponsible, so were the German banks that happily loaned out the money. So if Greece defaults, the banks go kablooey. But they're too big to fail, which means the German government would be forced to bail them out. And guess where the bailout money comes from? Tax dollars.
This means that German taxpayers have a bleak choice. They can shovel lots of money to Greece to keep them from defaulting, or they can refuse, and then shovel lots of money into German banks to keep them from collapsing. Either way, German taxpayers are going to foot the bill. They just haven't quite accepted this in their gut yet, and it's hard to blame them. They're pretty badly screwed no matter what.


Hmmm. Given that choice, they might decide they'd rather give their money to German banks than to Greek civil servants. What happens then?

Greece defaults. And that almost certainly means that Greece exits the euro.


Why?

It's the growth thing again. If Greece defaults, nobody will loan them any money. That means huge cutbacks, which means the economy will tank, which means even more cutbacks, etc. The traditional way out of this spiral is a massive devaluation of your currency. But Greece doesn't have a currency. It has the euro.
So if they want their economy to grow again, they have to (a) default, (b) exit the euro and readopt the drachma, and (c) devalue the drachma. This will cause massive amounts of pain, but it will also make Greek exports super cheap, which will eventually revive their economy.


So why not just let that happen?

It's just too catastrophic to consider. German banks, of course, would collapse and have to be bailed out. Ditto for banks in other countries that have lots of exposure to Greek debt. But that's not the worst of it. If Greece exits the euro, it will become terrifyingly obvious that other weak countries might exit too. Portugal, Spain, and Italy are the obvious candidates. Investors, spooked at the thought of their money being stuck in a country that might exit the euro and devalue all its bank deposits, would start huge runs on banks in those countries. The ECB would have to intervene and provide liquidity without limit. It would be a disaster.


So exiting the euro can't be allowed?

Right.


But if there's no exit, there's no devaluation, and Greece is pretty much screwed forever.

Right.


So who wins?

It depends on who blinks. Exiting the euro would be no picnic for Greece. But they could decide it's better than endless indenture and threaten exit in order to get a better deal from the Germans. Then the Germans have to decide whether to call their bluff.


Wow.

Exactly. Wow. Everyone knows that somebody's going to lose a huge pile of money over this. What's really happening right now is a very high-stakes negotiation to figure out just how the losses are going to be parceled out. Stay tuned.
UPDATE: It's actually a little unclear just which country has the biggest exposure to Greek debt. Maybe Germany, maybe France, maybe Switzerland. See here, here, and here. And the ECB owns a lot of Greek debt these days too. But the general principle doesn't change much. One way or another, Europe's big countries have to decide whether to bail out Greece or whether to let them default and then bail out their own banking systems

Weekly Email

Free Service

http://www.johnmauldin.com/images/up.../mwo112511.pdf

http://www.actionforex.com/action-in...0111126154258/

Fair enough. I was hoping to start a discussion on Brooks. I honestly find something valuable in every paragraph... however you do need to do some mental gymnastics to figure out what he is talking about.

For example, that paragraph you came up with deals with two of the most important topics in technical trading. The first is how to spot a trend reversal. The second is how to profitably play the volatility of the reversal. Whats more, FA can not help you in any way with either topic.

At first I agreed with you and standard wisdom that the lower TF's were more noise and harder to trade. I stuck with them because I wanted to learn to read charts charts. Lower TFs provide an excellent learning opportunity because the feedback cycle is much faster.

As time goes on, I am more and more of the opinion that the lower TFs are as reliable as the higher TF. What is more they provide an enormous advantage because the risk (pips risked per trade) you assume is so much lower, your exits are much tighter, and profits compound much faster.

FA can be used to spot a trend reversal. absolutely....the signals for bearish eur/usd has been sounding since 3rd quarter 2009.....the last straw was the dubai debt crisis...which broke the back of the eur/usd rally in 2009 from 1.5050. Before that...there has been strings of economic warnings.....even as the eur/usd climbs higher and higher. In my little experience, i often found that in forex, technicals lags fundamentals most of the time....in stocks trading, it tends to be fundamentals lags technicals most of the time......personally, i prefer both technicals and fundamentals to be aligned before i take action.

DDDD,

I agree that:

 

1. fundamentals drive the price,
2. if you had to chose between a technical signal to go long and a fundamental to go short, go with the fundamentals
3. Any major trend reversal will have a very strong fundamental reason

However, when it comes to picking your entries and exits... I know of no way to do that with fundamentals...and no way to trade the lower TFs with fundamentals (although you could decide to only take trades in one direction) and no way to capitalize on volatility using fundamentals.

A typical move from 1.49 to 1.24 say... could net you 2500 pips if you picked the top, the bottom and held it for the year it took to get there. Or you could make 20,000+ pips trading the same move, but playing the volatility. And playing volatility is all about technical analysis.

i pretty much agree with you except for one part: if fundamentals says go short and technical says go long. I diverge with you there. i will do one of two things. 1. do not take any trade. 2. take the side of technicals(i always use stops.). A good example is my CAD/JPY trade.( i should have taken the eur/jpy instead). anyways, the fundamentals of cad is superior to that of jpy....but i went long jpy and short cad. I just think the strength of the multiyear downtrend is too strong to ignore....besides, the same setups was happening almost all across the JPYs....

however, there are times i strongly doubt the strength of technicals to beat fundamentals, check out exhibit A .

Bottomline: my preference is when fundamentals and technicals are aligned....probably also best for no stop loss traders.....but sometimes, when fundamental and technicals diverge, i use my own personal judgment on what to do--which one to prioritize or to just sit on the sidelines.

Lol, I diverge with myself. In fact, I usually do exactly what you do. Stay out or go with a technical trade.

I am under the impression that I take fundamental trades because a couple of trades I took. The first was a breakout of 1.49 in May. I got stopped out, but re-entered short, against the trend, and it worked out very well for me. The second was the Bull flag at 1.45 in August. Same story. Each time I said "No Fing way it is going to go up".

However, when I look back at those trades, there were excellent technical reasons to take them. Only... I didn't know enough about technical trading to take them back then.

Good....Morning all - Where ever you are

Hi Aaron, can you tell me which one of the Al Brooks you would recommend.
I could really do with learning more on charting.
Thanks

this is the one
Reading Price Charts Bar by Bar:

The Technical Analysis of Price Action for the Serious Trader
http://bks2.books.google.com/books?i...om=1&edge=curl

Thank you

How can i save this on my computer ? it's all Chinese link ...

You can go to amazon and have it delivered

Thank you ,Aaron

That is a very good read for us new Forex Traders.
I am learning these as I Trade with my friend who is a 13 year Forex Vet.
This book will be a great reference point for me to come back to as I make my trades.

Also this will help me to identify better so I can make my own trades wisely.

Before that book was released
Video by book Author :
http://vimeo.com/9597720

save your money.

Big step up with the avatar.

Seriously, it is not only the best book I have read about forex, it is better than all the other books combined. Pretty much every paragraph has something I can use practically. But it really is a lot of work. I have been at it for a month, and will probably spend another couple of months before I am done.