Monday 25March2013 - The New Rules for The Euro Zone Game!

From the New York Times re Cyprus

While depositors with less than €100,000 in their accounts will be untouched, people with more money will take losses, in a first for euro zone bailouts. So will senior bondholders in some of the banks, who have hitherto been untouchable in such bailouts.

And breaking additional new ground, a euro zone country is taking steps to prevent people from taking their money out of financial institutions on a large scale. The measures, known as capital controls, have typically been used only in emerging countries, like Argentina. Now Cyprus, a longtime money haven, is struggling to figure out how to prevent it from fleeing.

“This is just the beginning,” said Nicolas Véron, a senior fellow at Bruegel, a policy research group in Brussels, and a visiting fellow at the Peterson Institute for International Economics in Washington.

“For the first time, we have capital controls in the euro zone. We’ve just spent the last three years saying we can’t have that,” he said.

 

“The next time there is a crisis somewhere else in the world, people will think of what happened in Cyprus and will try to get their money out much faster.

“These are the new rules of the game.”

 The Euro was weaker vs the US dollar today. As indciated in the EWI Euro chart below the short term downside target is 1.268 from todays 1.2854 close. This would most likely mark the end of wave 1 of a 5 wave downward move vs the US dollar.

For those who mid February entered a short term trade with EUO the sell target would be $20.43US but for execution a $20.38 Sell order would be reasonable. On the other hand one can continue to hold through a wave 2 a-b-c counter trend.