FX.co ★ Fundamental Analysis, for July 24, 2012

The market almost did not change during the last few hours, although it seems that the situation within the European countries suffering from debt crisis is worsening.
The statements made by European leaders either heads of states or finance ministers seems to be promising but just reveal more political problems and lack of leadership, however, it is possible to notice some changes in German and French outlook.
These two countries, together with Luxembourg, were the only ones to remain unscathed throughout this financial crisis. All this only makes the situation more complex, and it is obvious that the problem is impossible to solve without money injections.
Germany continues to insist on adjusting economies, the South demanded to initiate growth and use more money. Other countries, including Spain, one of the major European powers, unlimited credit to take voluntary debt markets, and interest rate you pay for the same which had in turn led to the rescue of Greece, Ireland and Portugal.
It is obvious how difficult the Spanish situation is: the government of Rajoy made adjustments for 65 billion euro over 3 years. If the country's debt is around 800 billion and it pays 6% annually (a figure already exceeded in these times), Spain would pay interest for about 50 billion euro annually. In other words, the effort of 3 years later would go in only one of interest which is unsustainable from every point of view.
It is necessary to lower those costs and Spain no opportunity to do it by itself. For example, consider the efforts of the European Union, which probably takes action when evaluating the opportunity of losing the fourth power of the continent.
The euro in this context, reaches two-year low every day, and falls more rapidly not only because the dollar goes through its best. Proof of this is that the currencies of the countries with fewer constraints, such as those related to oil and Asian economies are showing signs of strength.
Even the British pound falls in the way that makes the euro. The British currency shows signs of weakness, but the low is less pronounced, and it is likely to see a recovery in the short term.
The Australian dollar, along with the New Zealand dollar are benefiting again amid indicators from China, the main market of Australia and New Zealand, showing some improvement in the manufacturing sector.
Both coins left two separate gaps in their crosses with the dollar on Monday and are likely to meet during the next few hours.
For this to happen, some things must take place. First, the Dow Jones confirmed an upward trend change that was late in the day before and it did close in low, after a session start as bad as it was rarely this year.
Also there should be a change in the courses of European indices. The stock exchanges in Frankfurt, London, and Paris and, above all, Madrid, operating at a loss to varying degrees, and can hardly change its trend in a few hours.
The yen is unchanged, confirming signs of strength, which also marked a mood of the markets. It is known that when the yen increases, the things are not right.
The Canadian dollar and the Mexican peso are down by the fall of oil, but have slowed in these hours back to give bearish signals.
And the main advantage of all this is the Swiss franc. It does not grow, precisely, but because the appropriate measure of the Swiss National Bank to anchor the euro to 1.20, for several months. Thus resulted in 3 things that do not fluctuate against the euro, the currency of neighboring countries, and affecting trade directly, that leave be sought as a refuge, poor suffering the yen is devalued against the dollar. In September 2011, when the franc took this step, we said that the SNB should have some information about a sharp decrease of the euro, and it looks like it was. The crossing USD / CHF is approaching and the euro will probably remain weak.

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