Monday, December 5, 2011

Italy Annouces Austerity

Monti unveiled a 30bn euro package of austerity.  Increasing value added tax, property tax, raising the pension age.  Mainly 20 bn euros of budgest measures over 2012-14 and futher 10bn in measures to boost growth.

The euro rallied 50 pips on the open - but retraced fairly quickly to close the gap at 1.34 and I got set with some longs at 1.3418 (trade 1258).

The asia trade was fairly muted, but we're currently trying to break out to new highs above 1.344.

The main level in the coming week will be 1.354 - and this may be breached if the EU summit is positive - one headwind we face is the possible ECB rate cut - which will make the currency fundamentally cheaper - however, it's obvious that the macro factors have a much greater weighing on the direction of how the euro will trade in the short term.

The target for this breakout if it occurs 1.354 - (1.354 - 1.336) = 1.372