Eurozone gets a breather

The decision or should I say indecision by the Eurozone finance ministers will offer a much needed breather for the battered euro. The 30 days grace they have offered to Greece could well turn out to be a master stroke, in two ways I believe:

1. They have sent a clear signal to Greece that there current plans for dealing with their debt is clearly not acceptable and that they need to go away and come up with a better plan.
2. They have also sent a message to the markets that a bailout is not the right option and this shouldn't be anticipated by the markets each time a member country gets into trouble, rather they want the market players to believe that they want fiscally responsible management over the lifeline approach.

So where does this leave us, well its pretty clear after yesterday that the market is so short the euro that a short covering day was going to happen sooner or later and some profit will be taken off the table. A move past 139 in EURUSD and 125 in EURJPY would signal to me that we have something more than some short covering.

The market now has four weeks to take the euro in the other direction and I think this is exactly what will happen, at least until Week commencing the 15th March when the Greece decision is due. The short side of the euro looks overdone and exhausted and as evidenced yesterday when the pressure valve was released and we witnessed a 200 pip move I think the market might agree with me, let see.