Update EUR-USD forecast may 16 2012

forex trading outlook today - Update EUR-USD forecast may 16 2012 : Former ECB Pres Jean-Claude Trichet said that Greek exit ("Grexit") would be the "worst option". Trichet said that he cannot imagine it at all. There cannot be any doubt that euro is a rather stable currency with a safe future. Current trumoil is a debt crisis and not a currency crisis - Weltwoche magazine - BBG.

On FX, strong warnings from ex ECB Trichet on consequences on Greece eurozone exit - and not to downplay impact as some Eurozone policy makers have. Remember Lehman Brothers? EUR/USD under heavy selling pressure, with some reports that Greek 2023 bond yields have soared above 30% for the first time. Spanish 10-year yields levels at 6.51% - above critical 6.50% and nearing 7.00%. while Italian 10-year yields seen around 6.15% - with both approaching borrowing costs that are deemed too high, triggering concerns over bailout - which could trigger fears that the EFSF/ESM firewall may not be sufficient.

EUR/USD hit 4-m lows around 1.2682-83, lowest since January 17 1.2647, focus on year lows of 1.2625 on January 16, and the huge digital options there as noted by our Options guy. EUR/USD eye break of 1.2650 options. EUR/USD offers at 1.2700-10. USD INDEX hit fresh 4-m highs 81.573, high since January 16 81.702, eye test of 82.00/82.50 : as EUR hit 4-m lows, AUD hit 5-m lows 0.9876, USD/JPY hit 2-week highs 80.45 earlier. USD/CHF hit 4-months of 0.9470 on SNB defence of EUR/CHF 1.20 through the legs. While USD/SEK hit 2-year 4 month highs around 7.2290-00 on broad based USD buying on safe haven, given the risk aversion. WL

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