Draghi remark throws the cat among the bond pigeons | Greek bank deposits at lowest in 10 years – WSJ

As noted yesterday, the Euro – US dollar pair had been responding for the previous two days to the positive vibes coming out of the Eurozone, bidding up the Euro. This tendency accelerated during and after the ECB monetary policy statement and press conference on Wednesday.

One might have expected that there would be something of a correction yesterday, after two days of solid rises and, indeed, it looked like that was about to happen early on. However, it now appears that a fairly offhand remark made by Draghi at the press conference in reply to a question from a journalist, when he said that fixed income, or bond, dealers would have to “get used to” volatility in that market, had a big effect. It seems to have triggered a surge of buying in the Euro, as elevated Eurozone sovereign bond market activity can have that effect. Then, a large number of sizeable Forex players, who had been betting on the Single Currency going down, found that their protective stop loss orders were being hit.

As we know, a stop loss order on a short trade is a buy order. All of these coming together yesterday morning had the effect of making the EURUSD pair take off to the upside – a classic short squeeze.

The upward swing was neatly reversed in later trading and, towards the close of the London session yesterday, the exchange rate was pretty much back where it had started, and was respecting the 200 period Exponential Moving Average (EMA) on the 10 minute chart as a support level (see chart above).

Greek bank deposits at lowest in 10 years – WSJ

We are grateful to the Wall Street Journal for the graphic above, which illustrates the acceleration of withdrawals from Greek banks on the back of the current difficulties that the government has in reaching agreement with the EU and the IMF regarding bailout funding.

Greek bank deposits have now fallen to a level that has not been seen for 10 years.

Greek banks themselves are being propped up by emergency funding that is routed from the ECB through the Greek central bank. The whole sorry story is one more reason why the Greek situation must be resolved in the very near future.