Earlier in the month, in the aftermath of Dubai debt trouble, focus was directed on some European countries with negative balance sheet. Greece managed to have credit rating lowered by Fitch, and later on,  Moody’s. Greece promised to make improvement in new budget, bringing it more in line with directives from EU. Time will tell if they manage to stick to it. In the meantime other countries in Europe face their own credit worries. Among the most effected is Latvia.

Huge portion of loans in that country has gone bad. One of the most popular form of collateral, after mortgages, are cars. Rising rate of debt default forced banks to repossess cars, or seize them to cover the loans. Number of vehicles in banks’ inventories is so great, that they can not be sold locally and must be moved abroad. This led to a paradoxical situation, in which Latvia, with no auto production capacity of its own, became a net car exporter. In a country of a little over 2 Million people, more than 10,000 cars were shipped abroad for liquidation. Big chunk of them found new homes in Europe, but some were exported as far as New Zealand, Africa or Costa Rica. Only about 200 new vehicles were registered in October, 80% decline from a year ago. That’s a credit crunch, all right.

EUR-CAD provided a little “crunch” of my own. This set up was discussed in the Yuan post yesterday. Long entry was scheduled to become live at 1.5105. Price movement triggered the ordered and then reversed. Sharply. Earlier in the day minor low was formed about 1.5040. I used it as a stop and closed the trade for 71 pips loss.  Currently price is approaching another, more important low, which should provide support. I’m looking for a reversal candle pattern to form in this general neighborhood on hourly chart and enter long again, with an objective of 60-70 pips. If something like this shows up over next 3-4 hours, trade should have very small risk.

I’m adding one buy order, this time NZD-CHF. If the price moves above 0.7355, I want to be in. Hourly chart is moved and it doesn’t offer a big objective, about 45-55 pips. Which is just fine in this shortened week. Don’t want to be in trades with too big expectations and then have to sit on them over the long weekend.

Mike K.