You would think after twenty or so major and mini summits over the period since the Greek saga commenced, the European leaders would have enough experience to have successful productive summits. We are headed for another important gathering in Brussels on Thursday and Friday and, unlike the pre summit optimism at the early meetings, there is now apprehension this meeting will fail to provide an answer.
The troubled reality of Europe and the single currency, unlike prior summit weeks, is under pressure. So far the break has been contained in an area of minor support around 1.2440. Failing this level, a return to the 1.23 handle looks like a target for the bears. The specs have reduced their long positions (most recent COT Report) by 49K contracts in the futures markets; however, they remain a net short of 176K contracts.
Market action differs from that prior to other pre summit trading sessions. Then it was generally brimming with optimism, often taking the market higher and anticipating the best. It then seemed like the euro would sell off after the meetings. Will the market take the other tact this time? We sell off this week and rally next?
There have been more stories about the pending demise of the euro. Usually when there is a dynamic change such as this, it is preceded with a dynamic political or financial event, and a wash out in markets. Such has yet to happen.
We prefer the short side of the EURUSD with a target in the 1.23 area.