There’s talk this morning of a Greek “credit event”, according to the ISDA.  So what does that mean?

Well, first the good news – most likely Greece will get the 130 Billion Euros it needs.  The IMF board is also voting on March 15^th regarding a 4-year loan program for Greece for an additional 28 Billion Euros.

The problem is that by invoking a CAC (collective action clause), Greece is essentially forcing creditors to take a cut on the amount owed to them, in some instances by as much as 70%.  This causes the triggering of credit default swaps, and the ISDA has scheduled an auction for March 19^th to cover the nearly 3.2 Billion Euros in payouts outstanding so far.

Essentially, by declaring a “credit event” (the market and media friendly way of saying “default”), the ISDA is protecting the CDS market from further claims from creditors effected by the CAC.

What does all this mean for the Euro?

It depends on whether the markets put more emphasis on Greece receiving the bailout it needs, or on the fact that it had to default on the majority of its obligations in order to qualify for it.

As of now, we’re watching a key price level at 1.3117 on the EUR/USD – this is the critical “neck” line of a Head and Shoulders pattern on the Daily chart.  If we close below this level today, very likely a prolonged down move will follow, taking us to 1.2855; if, on the other hand, 1.3117 can hold as support, we can expect this pair to continue chopping in the 1.3095 – 1.3290 range in the days ahead.

Across the Atlantic, the Fed will be releasing the latest Budget Balance figures for the US at 18:00 GMT, widely expected to widen from -27.4 Billion Dollars to -229.2 Billion.   Here again, much will depend upon the market’s perception – a widening deficit can potentially be viewed as negative for the long-term economic outlook, but at the same time as creating greater demand for the currency.  Once again, whether we close above or below 1.3117 when all the dust settles will be key.

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Trading in the foreign exchange (FX) market on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent advisor if you have any doubts. Most importantly, do not invest money you cannot afford to lose. Past returns are not indicative of future results.

We have to wonder, with some members of the EU Commission already talking about a THIRD bail-out for Greece sometime in 2013, and the LTRO (long-term refinancing operations) figures coming in way above expectations, if February’s rally on the EUR/USD is finally coming to an end.

Perhaps.  But also perhaps not.

We’re currently watching a critical support level at 1.3321 – this is not only our central, 0% Fib, but also a prior resistance level from 3 weeks ago (and resistance has a way of becoming support).

The pair might be forgiven for briefly testing levels below this, as the daily 21 exponential moving average is currently at 1.3251 (and rising), but that’s about.  Anything significantly below would put  the Euro into a downtrend which could take us as low as 1.3056 or 1.2974 within the next week or so of trading.

A bounce at 1.3321 (or the 21 EMA), on the other hand, could pave the way for reaching long-term Fibonacci targets, currently waiting at 1.3586 and 1.3750 (unless stopped first by the daily 200 simple moving average, currently at 1.3715.

Knight Media Group and its affiliates assume no responsibility for errors, inaccuracies or omissions in these materials.  No liability is assumed for any direct, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials.  This e-mail is not an offer or solicitation to buy or sell any currency or futures contract, nor are Knight Media Group or fxKnight.com to be considered financial advisors.  Knight North America is licensed and regulated in the United States by the National Futures Association (NFA # 0419564).

Trading in the foreign exchange (FX) market on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent advisor if you have any doubts. Most importantly, do not invest money you cannot afford to lose. Past returns are not indicative of future results.

Gold took a serious tumble today, a day filled with news releases regarding Europe’s LTRO (long-term refinancing operations), and commentaries from Bank of England Governor Sir Mervyn King and Fed Chairman Ben Bernanke.

There were other forces at work as well.  The European Central Bank sold 7.6 tons of gold last week, very likely as part of a fund-raising move to meet its share of the Greek bail-out contributions.  Many hedge funds sold off as well, in order to cover their losses in equity markets.

There is also a rumor that the Chicago Mercantile Exchange will again raise its margin requirements for the precious metal, as they did back in August.  Larger margins, of course, mean holders of gold contracts must either make additional deposits on their accounts, or sell off some positions.

So does all this pressure mean our rally is over?

Not necessarily.  While today’s drop was indeed dramatic, gold actually managed to find support above the weekly 21 exponential moving average.  Also, to some extent, this drop was to be expected from a technical perspective, as 1787.79 is a prior high from October.  There were also divergences visible on both the daily and 4-hour charts.

Where do we go from here?  That depends on a large part whether we can find support in the 1671.22 – 1690.74 zone in the days ahead.  If so, look for gold to rally back up to 1763.11, possibly 1787.79 once again (our long-term targets for gold are at 1828.06 and 1855.00, possibly as high as 1881.39, but that’s only IF we can break 1787.79 and find some support there, first).

If gold fails to find support at 1671.22, then the next potential downside targets include 1647.10 and 1614.44

Personally, over the long-term, I remain confident that as governments continue print their way out of this financial crisis, gold will continue to become increasingly more attractive to investors.

Knight Media Group and its affiliates assume no responsibility for errors, inaccuracies or omissions in these materials.  No liability is assumed for any direct, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials.  This e-mail is not an offer or solicitation to buy or sell any currency or futures contract, nor are Knight Media Group or fxKnight.com to be considered financial advisors.  Knight North America is licensed and regulated in the United States by the National Futures Association (NFA # 0419564).

Trading in the foreign exchange (FX) market on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent advisor if you have any doubts. Most importantly, do not invest money you cannot afford to lose. Past returns are not indicative of future results.

Responding to renewed calls from the U.S. for the U.N. to impose unilateral sanctions against Iran, President Mahmoud Ahmadinejad threatened that any new sanctions will be countered by a naval blockade of the Straight of Hormuz, a major route for the transport of oil and imports for Saudi Arabia, Kuwait, Iraq, Bahrain, and the United Arab Emirates.

What can we expect from oil prices in the next few weeks?

An important level to watch is 101.75 – it has already held as resistance several times in the past, and the current daily candlestick formation suggests that we will test it again.  Breaking a prior trendline and over the past few days establishing it as support is also a bullish sign.

 If price can break the 101.75 resistance and find some support there, our projection for the next top would be at the 138% Fibonacci extension, or 105.28, based upon yesterday’s 38% retracement.  Price action also suggests that the markets have noticed this particular Fib, with the prior daily wick snapping to the 98.22 level rather than the recent support at 97.84

If, on the other hand, 101.75 continues to hold as resistance, then look for a range to develop between this level and 99.57.

Rumor has it that this “someone” was ExxonMobil, which begs the question why the American oil giant would be so interested in acquiring Sterling.  Could this, perhaps, be a prelude to a buy-out of BP?  Certainly, share prices of its British counterpart have been badly beaten down by last year’s Gulf of Mexico fiasco following the explosion aboard the Deepwater Horizon, not to mention recent drops in worldwide oil prices.  Currently trading near lows not seen since 2004, that makes it a ripe target for takeover.

Translating this into a currency play, whenever I see the Pound move as the Euro stands still (or vice versa), I immediately turn my attention to the EUR/GBP.  In this case, I’m looking for a short, as the Pound is on the opposite side of where it normally sits on the GBP/USD pair.  Thus, as the Pound gains while the Euro stagnates (or, even better drops due to the next round of bad news on the EU debt crisis), we can expect the EUR/GBP to drop, as less Pounds are needed to purchase each Euro.

Thus far, a Fibonacci level at 0.8381 has held nicely as resistance, though I’m prepared to let it the EUR/GBP retrace up as high as 0.8438, where its weekly central pivot point is resting, before rethinking my trade idea.  Since this particular Fib pattern originally retraced up to the 50% level at 0.8657 back on November 22^nd, I’m ultimately looking for a downside target at 161%, or 0.8271.

Is gold finally ready to end its decade-long rally?  Over the long-term, I suspect not.  While inflation, for the moment, seems subdued, the karma of printing all this money (bailouts, toxic asset repurchases, FX swaps, “quantitative easing”) will eventually catch up with us once the economy starts to recover and grow.

But, in the short-term, there’s no denying that price for an ounce of the yellow metal is certainly dropping, and not particularly due to any significant change in supply and demand (last time I tried to fill a large bullion order not many of the smelters had anything left to sell, as the gold dust already had a buyer the moment they dug it out of the ground).

So where can we expect to find bottom?

Having broken both a month-long consolidation pattern as well as the key 1666.66 Fibonacci support level, we now have to return and test this level from underneath as our new resistance.  If it holds, look for a drop down to 1617.24, eventually maybe 1586.71.  If instead price manages to get back above 1.666.66, and hold that level as support, we can expect a return first to 1716.08, and perhaps eventually 1746.61.

UK’s Prime Minister David Cameron exercised his veto power over the proposed new EU treaty at Friday’s EU summit, in part to protect the City from over 20 new financial regulations including a financial transaction tax and reforms of short-selling rules and hedge fund operations.  (Naturally, the other part being to boost his popularity within his own party and a disgruntled public.)

While many have speculated that this marks the beginning of the UK’s departure from the EU, it is actually not much different from the island nation’s stance when the Euro first came into being a decade ago.  The UK is all for free trade and free travel, things which benefit its own economy, but just like they wanted no part of the unified currency, preferring to keep their prized Pound Sterling, we cannot blame them for not being eager to shoulder other countries’ debt or the regulatory burdens arising from it.

One would think that such a move would result in the Pound gaining against the Euro, but since Friday we’ve seen quite the opposite.  The reality as the markets perceive it is that while Europe may struggle but would eventually learn to get by without the UK, the UK is rather dependent upon its largest trading partner across the English Channel.

The next key test for EUR/GBP is 0.8476 – if this level continues to hold as support, look for a retracement backup  to the Daily 21 EMA near 0.8559; if, on the other hand, 0.8476 breaks and re-tests from underneath as resistance, we could see the current downtrend reach as low as 0.8258.

 Andrei Knight, Senior Currency Strategist, fxKnight.com

A devastating earthquake off the coast of Japan on March 11th triggered a tsunami so powerful, that over 8000 miles away it knocked off a section of the Sulzberger ice shelf in Antarctica the size of Manhattan.

Looking at the Japanese Yen, fear of intervention had established a solid floor at 76.60 against the US Dollar for several weeks (also a long-term Fibonacci level), however the currency’s status as a “safe haven” made it difficult for the pair to get above its 21-period exponential moving average and find support there – until the SNB’s announcement triggered fears that the BOJ will follow with its own intervention.

The USD/JPY dropped below that critical 77.19 support level today, indicating that the range between 76.60 and 77.63 remains in force.  If price falls much below 76.60, we most likely will see some sort of action from the BOJ.  If, however, we see a daily close above the daily 21 EMA at 77.19 followed by a breach of the 77.62 resistance level, it could well be the beginning of a rally that takes us first to the weekly 21 EMA at 78.88, with a possible secondary target at the next long-term Fibonacci level at 80.95