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Euro Gains But Bank Tests Lie Ahead

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http://www.guardian.co.uk/business/feedarticle/9162254

* Euro rises but resistance near $1.2675

* Banks stress tests eyed in Europe

* Charts suggest possible rise to $1.28 near term

(Updates prices, adds details, changes byline)

By Nick Olivari

NEW YORK, July 7 (Reuters) - The euro rose against the dollar on Wednesday in technical trading after breaking through resistance levels, which prompted some investors who had bet against the single currency to buy to prevent losses.

Concerns about the growth outlook for the global economy and plans to test the financial health of European banks had weighed on the euro for most of the session.

European regulators on Wednesday haggled over what details to reveal about stress tests of about 100 banks in a dispute that could undermine confidence in the health checks on the region's lenders. For more details see [nLDE6661JE]

But the euro/dollar broke through technical resistance around 1.2610, said Kathy Lien, director of research at GFT Forex in New York.

"When it broke through that, it broke higher and from this position there is no major resistance until 1.2676, the May high," Lien said.

Last week's data on euro/dollar short positions also indicated there was only a small decline in euro short positions, Lien said, which means there was still a lot of opportunity for a short squeeze in the euro/dollar.

Investors who bet against a currency are often forced to buy the currency to prevent losses if the currency actually gains.

The euro was last at $1.2645, up 0.2 percent on the day, even after worse-than-expected data showed factory orders in Germany, the euro zone's largest economy, fell for the first time this year in May.

So the economic data worsens but the Euro rises as people move to cover potential losses because the herd was buying.

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http://www.guardian.co.uk/business/feedarticle/9162254

So the economic data worsens but the Euro rises as people move to cover potential losses because the herd was buying.

Where they can, 'they' will cover up as usual. The markets do not really know what to do, except study their charts and keep see-sawing. If the stress tests are a cover up, then there will suspicion and the detail required may not be released, leading to more suspicion. It will leak. Wait and see.

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http://www.guardian.co.uk/business/feedarticle/9162254

So the economic data worsens but the Euro rises as people move to cover potential losses because the herd was buying.

Funny old market recently. The stress test "data" must have been agreed in advance as there is NO WAY the ECB would allow any negative surprises out of the bag. There's a war on you know and loose talk costs lives.

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Today you've had a lot of rumours about what exact parameters will be used in the euro-area bank stress tests.

Investors are making an analogy with what happened with the US bank stress tests in early 2009 where they became a turning point for the stock market and started off the rally from 700 to 1200 on the S&P.

Add that to uprated corporate earning expectations, a total consensus for double-dip/deflation/end-of-world, big short positions etc. The market always takes the path that causes the maximum amount of pain to the most people ...

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Today you've had a lot of rumours about what exact parameters will be used in the euro-area bank stress tests.

Investors are making an analogy with what happened with the US bank stress tests in early 2009 where they became a turning point for the stock market and started off the rally from 700 to 1200 on the S&P.

Add that to uprated corporate earning expectations, a total consensus for double-dip/deflation/end-of-world, big short positions etc. The market always takes the path that causes the maximum amount of pain to the most people ...

If, which seems likely, they have rigged the stress tests we can expect 1000 up on the DOW and probably almost as much on the FTSE. The Euro will break 1.30 to the $ and we may even see a large sell off in gold as the fear factor will have been removed from the market. The markets will WANT TO BELIEVE the problems have all passed on and belief is enough to drive them higher.

There is simply no negative news out there to bring out the sellers. With the US claiming they will return to 2% + growth in the next Q there is clearly no evidence of any stress in the US economy whatsoever.

Is it time to buy back in on the large multinationals like Honeywell, GE, Boeing and a few other industrials?

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http://news.bbc.co.uk/1/hi/business/10546014.stm

EU names list of 91 stress test banks
Page last updated at 19:32 GMT, Wednesday, 7 July 2010 20:32 UK
The capacity of banks to survive further financial stress is at issue
A list of 91 banks that will be subject to "stress-testing" across Europe was released late on Wednesday.
The UK's big four banks, HSBC, Royal Bank of Scotland, Lloyds and Barclays are on that list, along with fellow major European banks including Deutsche Bank and BNP Paribas.
The tests will assess whether Europe's banks are able to withstand future financial shocks.
The list is much longer than the original one planned by the EU in June.

They will all pass with flying colours because they are all backed by taxpayers and are "too big to fail" thus no test to pass that will make an iota of difference.

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[quote name='Realistbear' date='07 July 2010 - 10:11 PM' timestamp='1278540680' post='2610672'

Is it time to buy back in on the large multinationals like Honeywell, GE, Boeing and a few other industrials?

Why do you think the CDS of many blue chips trades through their sovereigns? They are cash-rich, deleveraged, with the flexibility to move earning streams anywhere around the globe. The sovereigns and their citizens are up to their eyeballs in debt!

Much of the recent negative macro data doesn't necessarily undermine Q2 earnings for big multinationals. So investors are going to pare back shorts into this data. But whether it is more than "buy the rumour and sell the fact" remains to be seen.

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  • 153 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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