• Gold breaks months-old uptrend; closes at $1516
  • ECB’s Trichet: Governments are responsible for their debts, not the ECB; working assumption that no country ill leave the euro; July hike probable but not certain
  • Dutch FinMin: Must be substantial private sector contribution to Greek aid if wants Dutch participation; Dutch position close to Germany’s
  • Fed’s Lacker; Lack of economic traction frustrating; Fed should be wary of additional QE
  • Greece’s credit rating cut three notches by S&P to CCC; outlook negative. Lowest rating in the world
  • BOE’s Weale: Delaying UK rates hikes creates significant risks; Substantial risks CPI could exceed 5% this year
  • S&P 500 ends up 1 point at 1271
  • US 10 year note yield rises 1.5 bp to 2.9875%
  • Oil falls $2.35 to to $96.96; gold falls $15 to $1516

It was a fairly quiet session of backing and filling for much of the US morning. Prices in EUR/USD traded generally firmer with risk appetities improved after Friday’s plunge. EUR/USD reached the 1.4405 area before easing back to the 1.4375/85 area where it was consolidating when news of yet another Greek downgrade hit the tape.

EUR/USD fell only to 1.4350 on the news, out first hint that the usual market dynamics were not at work. Gold soon tumbled through uptrend support around the $1523 area, setting off stops as low as $1512. Gold should not fall after Greek downgrade. EUR/CHF should fall but it did not.

Guess what happened next? The short squeeze from hell. EUR/USD leaped to fresh session highs at 1.4430, EUR/CHF jumped from 1.2025 to 1.2090 (If EUR/CHF barriers at 1.2000 were not taken out after a three-notch Greek downgrade, when will they be?) and all the other risk-trades bounced as well. Cable jumped too as the hawkish Weale comments coincided with the markets desire to cover euro shorts.

1.4450 is important resistance for EUR/USD. I like taking advantage of today’s squeeze to set fresh shorts with a stop in the 1.4465/70 area for a return to the low 1.43s. Weak US retail sales data tomorrow could spark another risk-off rout, to my mind.