Few days after approving aid for Greece, European Union, its Commission for Economic and Financial Affairs, is debating if tougher rules governing budgets of member states should be imposed. Goal is to prevent similar situation of developing in the future. Some proposals include withdrawal of EU infrastructure form countries not sticking to debt and budget deficit limits. German Chancellor was more extreme and suggested expelling from the Euro union members which keep breaking rules regulating these matters. That probably is not the best way to keep the Union together, so likely-hood of adopting such severe punishment is remote. But it certainly shows deep division among leaders. New rules are to be crafted in May.

However, they are not wasting any time warning some countries to tighten up the belt. Right now. Portugal was singled out and its Finance Minister was told to start cutting budget deficit. It is clear that the Union would have very hard time bailing out another member and would like to prevent if at all possible. Since few more countries might be in similar situation, we can expect pressure put on them. It could be a long time, if ever, before everybody is within guidelines. Euro will probably go through jitters every time new scare, real or imagined, is reported.

While talking about Euro might as well discuss EUR-GBP. So far this week price has been locked in a relatively narrow range. What’s interesting, is the fact both sides of this congestion zone gaps, acting as resistance and support. This is relatively rare on Forex charts, although common when following commodities. Eventually, probably soon, price will break out of this range. Direction is hard to define, it can be traded either way, just by following the price.

Smaller term chart indicates that price is likely to try down move first. Recent action is concentrated in lower part of the range, very close to support. I’d like to sell it on a move under 0.8800. Using this chart, hourly, to set trade parameters, provides a relatively small objective of 50 pips. These are high value pips, though. Adventurous souls could decide that 0.8710 is better objective, previous low. It is always possible. For now, I like 50 pips better. Should direction reverse, long position will make sense at around 0.8870.

Possible Yen trades from yesterday didn’t happen. JPY kept getting weaker, until got close major resistances, as visible on GBP-JPY chart, but also AUD-JPY and EUR-JPY. I wasn’t in front of computer then. For the Beast, 145.00 level is of importance. Have to see if the resistance holds, giving a sell signal, or fails, providing buying opportunity. In a perfect world we would have a good size pull back, and then a decisive move up, setting up two decent trades.

Mike K.