If you were a buy stop, you’ve likely been triggered.
This morning’s rally took out resistance in the 1.3555/75 area and sent the euro up to 1.3615 briefly before relenting.
Traders were caught short euros amidst reports that European officials are warming to the idea of using the IMF as an intermediary for ECB lending to sovereigns.
While such a move would not solve the euro zone’s problems, it would stem the bleeding and narrow spreads between the yields on European bonds and the German benchmark, which have been hitting record wides this week.
I can’t imagine IMF shareholders outside the euro zone agreeing to such a scheme without extracting major reforms, like a European Treasury, in return.
A Federal Europe would be a game-changer and would end the crisis, once and for all. That’s the endgame. The question is how long will it take to get there. Could take months, but will probably take years, in my view.
