Among the three main issues on the table, only one is close to being resolved, and not in a convincing way.
EUR/USD which jumped earlier above the range on hopes, now sees the bottom side of the range. Updates.
- Bank recapitalization: A decision to demand a recapitalization of around 100-110 billion euros was on the agenda from the weekend. This falls short of €200 billion estimated by the IMF and €273 estimated by others. But at least there’s progress.
- Greek haircut: It seemed that the banks’ offer of 40% haircut and the German talk about 60% would meet at the round number of 50% discussed by France. There’s still a good chance that this will be resolved, but currently there’s a deadlock.
- EFSF leveraging: Germany wants to avoid using the ECB at all costs. Unfortunately, other solutions for levering up the bailout fund are more complicated. So is agreeing on the sum. The markets want €2 trillion. €1 trillion was discussed. Reports coming out now talk about a delay to late November. This follows a report of a delay to Nov. 7th.
- No growth plans: The last point I talked about when talking about the upcoming failure of the summits, was the absence of any growth plans. Well, nothing new here.
A nice press conference is likely to happen with smiles and “determinationâ€. But without details and especially numbers, the downfall of EUR/USD is likely to continue.
The pair trades at 1.3870 at the time of writing, down from the tight range of 1.39-1.3950. Prior to this drop, it rose above the range. Support appears at 1.3838, followed by 1.38 and 1.3725. Resistance is at the previous range.
For more on the euro, see the EUR/USD forecast.
