Now that European Union announced that it will stand by Greece, financial press speculates which country will the next one in need of assistance. Spain is getting a lot attention because of budget deficit that has soared to 11.4% of its gross domestic product amid its deepest recession in decades. While the government has pledged to cut it to the Eurozone limit of 3%, most doubt it is possible to cut 50 billion Euros in spending while unemployment is at 20%. Financial markets reflect these doubts with costs of insuring Spanish bonds against default rising over last few weeks.

Financial support to more countries might prove to be very unpopular. Not everybody is happy with helping Greece, either. A poll conducted in Germany for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the Eurozone. Fully 2/3 of those asked were opposed to giving billions of euros in credit to Greece. These kind of sentiments will only increase if Spain, and possibly others, need support. Tough road ahead.

Most of last week I have been looking at GBP-CAD as a candidate for a long trade, but nothing came of it. Canadian Dollar has been very strong and the pair just kept heading lower. It tried to reverse couple of times, but without success. I will attempt to do it again, and hopefully witness it happen over next couple of days. After that I’m taking a short vacation.

We’ll see if it is going to test the minor high at 1.6550 or so. Best scenario would be to see that level, followed by a small pull back and then a breakout taking the price to 1.6725 or so. In the meantime, Yen pairs are something to watch, as well as opening gaps, just every weekend. Early next week EU officials are supposed to have more details on the Greece rescue package, which should have influence on the Euro. Might be a good time to stay away from it for a while.

Mike K.