In my previous post I wrote about how Europe may be facing (partial) bankruptcy and how the very survival of the Euro is in doubt.
Following reports of a 120 billion Euro bailout of Greece (whose debts are at a whole time high) the Euro has today reached a 1 year low vs. the dollar and has even broken through the psychological support level of 1.3000 USD. Click here to see a recent trend report of the EUR/USD
It seems that traders and investors are worried about two things:
1. Regarding Greece, there is disappointment on the bailout package. The first problem is that no one knows if the bailout package will be enough to get Greece out of the mess it has stumbled into. The second problem is that Greece needs to go through a brutal cost-cutting program over the next few years. This won’t be easy on the citizens of Greece who will need to tighten their belts quite a bit. Whether these cuts will last on a political level and what their effect will be on the Greek economy is still unclear and frankly, almost impossible to predict.
What is clear is that a lot of Euros will have to be brought into the market to pay for Greece’s problems. More Euros generally mean less value. In addition, it’s unlikely that the Central European Bank will raise interest rates on the Euro any time soon. With mounting chances of interest rate hikes in the US in the near future, the Euro looks very unattractive at the moment.
2. If you think Greece is the only problematic country in the Euro zone, you’ve got another think coming. Portugal and Spain recently had their credit rating slashed as both have huge debts which no one is sure will ever be repaid.
Spain in particular is in dire straits. The country has a 20% unemployment rate. Can you imagine that? It’s something that most western Europeans simply cannot understand. It’s something that just doesn’t seem to belong in the Euro zone.
There are already rumors circulating about a possible bailout of Spain which will make the 120 billion Greece will receive seem like pocket change. The Spanish Government is denying any such bailout is imminent but it all adds to the uncertainty surrounding the Euro.
Will the Euro continue to fall? It may be headed for further declines. It’s difficult to tell for sure. I’ll keep a close lookout on it for you and report further on this blog.
In other news, the guys from OU Forex Trader just released a new video which you should take a look at. If you recall, they’re the guys who created the Forex Mastery system, so they’re worth taking into account.
