President of the European Central Bank, ECB, Mario Draghi, today warned about continued risks to the European situation. Tax hikes and upward pricing pressures on oil are just the beginning, because the data, according to Draghi, may be signaling economic weakness in early 2013. Considering the SPX is near all time highs, a pullback may be warranted if the European situation escalates…not to mention if CDS start to be mentioned in the headlines too.
Moreover, Draghi also warned that Euro area risks continue to be skewed to the downside. Basically, should there be an adverse shock to their economic situation, it would probably result in negative growth and ever feared deflation. Traders will definitely keep their eye on the EUR/USD to monitor the Euro situation.
The technical picture for the EUR/USD seems to be rather bearish. EUR/USD is roughly 1% away from its 50-day moving average. This level should provide a short-term support, for there is also slight trend line support there, but it will probably be short lived as momentum and fear gain traction.
Italian 5yr CDS are up 0.37% today.
Spanish 5yr CDS are up 0.16% today.
