EURUSD: What Levels Are Defended By Market Makers?
19 July 01:08 PM
Market Makers are financial companies that buy/sell assets at their own expense. In the Forex industry, market makers are represented by commercial banks, which set buy/sell prices and provide quotes and liuidity.
What levels are defended by Forex market makers amid the continued eurozone crisis? Masterforex-V Academy, will help us to clarify the situation.
Supporting Euro – Major Goal For Market Makers
According to Masterforex-V Academy, de facto, no bank is interested in a collapse of the common Euro currency, which is the world’s 2nd reserve currency. The chaos provoked by such a scenario may go out of control and result in disastrous and unpredictable consequences, thus jeopardizing the entire global financial system.
The very fact that the 6E(EUR/USD) futures contract stays above last week’s volume cluster 1.2255 (12750 lots) suggests demand created by short-term speculators. Moreover, there are rumors that major banks start closing short trades during bearish moves. This fact may become an extra driver for a possible EURUSD rally.
There is strong demand around 1.2150, which is an option barrier. 1.2315 is a place where short-term traders and several private banks placed their stop-loss orders. If they are executed, this may provoke a rally up to pattern 24. There are big offers at 1.2400.
In general the 6E futures contract is fluctuating below major resistance levels, represented by volume clusters at 1.2490 (22900 lots) and 1.2583 (26800 lots). Therefore, there is little chance of a strong and aggressive rally in mid-term perspective.
Problem Solving: European Style. Will Banks Manage To Save Euro From Collapse?
As we know, Greece is the starter of the eurozone crisis:
1.Greek elections. After the parliamentary elections in Greece, there emerged a hope for the successful resolution of the Greek crisis. After the preliminary round, the center-right party is the leader (30%), then goes the coalition of left-wing radicals (25%). The left-wing party is number 3 (14%). Apart from these 3 parties, the parliament will be formed of 4 other parties with pro-fascist views. The current picture resulted from the political chaos recently seen in Greece. There is a change in the balance of powers. The center-left and right-liberal parties, who used to dominate the parliament (together they won 80% of votes during the previous elections), are now disliked by most Greeks because they are associated with painful austerity and enslaving liabilities to the EU (Greece received €130 bn from the ECB and the IMF).
Therefore, European politicians’ concerns over the new balance of political powers in Greece are quite explainable, especially as the leader of one of the major parties, who has all chances to succeed, is determined to cancel the credit agreement with the EU if his party wins.
At the same time, analysts keep giving gloomy forecasts. They say that if the left-wing radicals come to power, Greece will inevitably leave the eurozone, thus forcing the Greek financial system to collapse. However, the worst-case scenario now seems to stay unfulfilled because the leader of “New Democracy” promises that all the agreements concluded with foreign lenders will remain valid.
2.Capital Economics offers its scenario of how to quit the eurozone. Capital Economics offered a “practical guideline on how to leave the eurozone” for a risky economy, like Greece. The plan consists of 2 stages. The 1st stage suggests the introduction of a national currency pegged to the Euro as 1:1 (parity). Then it is necessary to convert salaries, prices and loans into that new currency, simultaneously allowing Euro transactions within the next 6 months. Moreover, the country that has left the currency union will have to practice austerity and strict budget discipline under the supervision of independent experts. The next step is to convert the public debt into the new national currency and to sign new agreements with the lenders over the ways and means of servicing the debts. At this stage, the country may well default, which will result in a “sound ratio” between the public debt and the national GDP (according to international standards, it shouldn’t exceed 60%).
According to Capital Economics, prior to leaving the eurozone, the country’s government should arrange a meeting in order to consider the future situation at least a month before the official withdrawal.
3.Italy stays optimistic. Mario Monti, Prime Minister of Italy, says the government is planning to save up to €4bn this year. In order to do that, the authorities should focus on austerity without increasing taxes. Next week the Italian government is to publish an austerity plan.
4.Spain looks determined to resist the crisis. Not so long ago, the Spanish authorities decided to create a “bad bank” to store all the “bad assets” of the Spanish banking sector. This step is expected to help Spain gain support from the Euro Commission and receive a €100 bn loan. Moreover, Spain will get more time to reduce its budget deficit down to 3% of GDP. The EU finance ministers agreed to wait till 2014.
Market Leader and Masterforex-V Academy would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
What is your near-term outlook for the Euro currency?
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