When the Dow tumbled in January, they blamed it on the Greek debt crisis. When the euro kept sliding off its November 2009 high, they blamed the Greek debt crisis. Greece has become the go-to reason for explaining weakness in various markets.
Not that it's a bad idea -- I mean, try and argue with it: Greece is in trouble, of course markets are falling! It's just that when the Dow, or euro, or DAX, or FTSE start to rally, somehow everyone forgets about Greece... until markets fall again.
If you have trouble with these "explanations," you should. This Sword of Damocles has been hanging over our heads for months, yet markets have fallen and rallied in the meantime. So, something else is moving prices, and that is -- traders' perception of the facts, not necessarily the facts themselves.
You can see changes in that perception in market charts: They show shifts in collective optimism and pessimism; every wiggle reflects a change. If you have a tool to help you predict those shifts, you can try and predict the markets. Here's an example.
On April 8, the euro fell to a two-week low against the U.S. dollar, pushing the EUR/USD exchange rate (and the most widely traded forex pair) to below $1.33. It's easy to blame Greece, but do that long enough and someone will call you a hypocrite. You need objective tools to make objective forecasts. On the evening of April 6, with the EUR/USD trading near $1.34, Elliott Wave International's intensive Currency Specialty Service said this in the daily update:
Update For: Wednesday
Posted On: Tue, 06 Apr 2010 21:09:31 GMT
EURUSD Last Price: 1.3399
[Lower, into a bottom] Barring a rally above the 1.3475 area... the euro is headed to a new low for the bear trend. It's not whether the euro will make new lows, but when the euro will make new lows.
The EUR/USD fell on April 7 and again on April 8, as forecast. If you are familiar with Elliott wave analysis, you see in the chart above that the decline would be labeled wave 5. You may know that 5th waves are final waves; after that comes a correction.
Did the April 8 decline mark the end of the EUR/USD's fifth wave? Find out now with the latest forecasts from EWI's intensive Currency Specialty Service.