So, this was one of the scenarios planned and legislated for.  That said, just as eurozone’s peripheral nations were shielded from their fiscal profligacy by ultra-low rates between 2000 and 2007, so is the US at this present moment in time, via a strong reserve currency and demand for treasuries, pushing 10yr yield back below 2%. It’s a toxic combination, driven more by investor positioning and liquidity than pure fundamentals but if a country uses it to delay the required medicine, then the punishment will be severe.

Interestingly, the IMF reports that sovereign wealth funds have also been lowering their euro-exposure, favouring the Japanese yen, the Aussie and the Canadian dollar. To add to the almost unanimous pessimism towards the euro, the overwhelming expectation of analysts polled by Bloomberg is for the euro to depreciate before year-end. To summarise then, the euro is gripped by a sovereign debt and banking crisis which very few believe Europe can resolve and traders and investors have supposedly fled the currency – it is universally despised. So, it seems reasonable to ask the following: if there has been such an incredible volume of euro-selling, why is the single currency not much lower?

As the Greek crisis continues to be a dominant issue that dominates EUR/USD and other currencies as well, every statement made during the weekend and every international conference can create a different start to the week – currencies trade in a significant gap from the close on Friday. In most cases, this gap is filled, but it still creates lots of action, while it’s still Sunday in the US and night time in Europe. But it’s not only on Sunday:

The Aussie had an  excellent week, reaching new highs without stopping. This week’s RBA meeting minutes, Chinese GDP and 5 other releases will set the direction of the Aussie. Here’s an outlook for the events that will move the Aussie, and an updated technical analysis for AUD/USD.