- Forex Commentary -

(Go to http://www.financialwire.net/2010/05/10/fa-daily-4/ for today’s Futures Commentary.)

May 10, 2010 (FinancialWire) (Investrend Information Syndicate) (Via Brewer Investment Group) (Overnight, May 9, 2010, Report)– Early trading today, as of approximately 10:20 AM EDT, has the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) down 0.65% on volume of 2,000,000 shares, while the PowerShares DB US Dollar Index Bearish Fund (NYSE: UDN) is up 0.67% on volume of 207,700 shares. FinancialWire(tm) contributor, Brewer Investment Group, provides us with some related perspective and insight regarding the outlook for the currency markets:

After an extremely hard sell-off which began Monday, the Euro stabilized on Friday and actually finished higher for the day. With the way information has been distributed this week, who knows why the market settled higher. Technicians will claim oversold conditions but that reason could have been used since Tuesday. Fundamentalists may claim that there was a delayed reaction to Jean Claude Trichet’s comment on Thursday that "Greece will not default." Maybe CNBC failed to play the video of unrest in the streets of Greece. In my opinion, the Euro stabilized on Friday because maybe someone saw the European Central Bank flinch.

As the Euro tumbled and the world watched the turmoil in the streets of Greece, the ECB sat comfortably on its collective hands. The staunch posture of Germany was never so obvious until this week when it most likely was the main country standing in the way of a bonafide rescue effort of the Euro. Watching the events unfold this week, I truly felt at times that Germany was taking pleasure at the way the events have turned out.

Despite attempts to calm investors and instill confidence in the Euro the ECB, led by its President Trichet, failed miserably to reverse the decline and make investors feel good once again about holding on to the Euro. As the Euro collapsed and the fear of contagion gripped the Euro Zone, I could only remember images of the hawkish ECB that waited until the last possible moment to begin cutting interest rates in July 2008 when every major central bank had already begun doing so.

The situation in the Euro Zone has backed the ECB into a corner and now the world is watching once again to see if the ECB is ready to act with clarity and conviction in an attempt to right the ship. Coming into Friday’s session, the ECB had three choices: either restructure Greek loans, lower interest rates to zero or begin buying Greek bonds. At this point, it is going to take more than just a few reassuring lines from Trichet.

Whatever it took to stabilize the Euro on Friday, no one will ever be certain; it may have been the way events unfolded this week in Greece or it may have been a well placed phone call from Fed Chairman Bernanke. It may have been the beating Trichet received from investors after he said Greece wouldn’t default and that the ECB hadn’t discussed buying Greek bonds in the secondary market.

I am not certain of the cause, but I do have a feeling something caused the ECB to flinch. What Friday’s action is telling me is that a plan is being worked on. It may not be the greatest plan in the world, but steps will be taken this weekend to attempt to fix the Euro. Don’t be surprised by an announcement over the weekend or early next week that the ECB will get off its hands and invoke unconventional means to shore up the Euro.

Source: Courtesy of Brewer Investment Group, LLC; For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

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Brewer Investment Group, LLC, advises that futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information provided in the above article is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Communications via resources@investrend.com with “Brewer” in the subject line.

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