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Euro & Cyprus

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The Euro closed at 12817 on the spot today. A close below 12824 will be a sell signal tomorrow. We have a Monthly Bearish at 12972 which if elected tomorrow will cause 13000 level to become important resistance for April. We have support at the 12625 area but after that we really have air until 12100 zone. May is shaping up to be a disaster for Europe.

The handling of Cyprus is so bad one would think it was decided by the 3 Stooges. Everyone in Europe is getting pissed off at Merkel and how the elections she faces is playing a critical role yet September is a long way away, Everyone is turning away from Merkel including the French. Her austerity is being rejected and some now even claim that if this continues Germany will abandon the Euro. Sources within Germany at the highest levels say that will not happen. Other rumors claiming this was really to stimulate Cyprus are absolutely insane. You cannot “stimulate” by creating massive deflation. Worst still, banking was a key comparative advantage for Cyprus, which is why so much Russian money was there. What has been done to Cyprus is to destroy its economy for banking was a key industry. That is now gone unless Cyprus wakes up and abandons the Euro before this is too late. Cyprus’ economy will be utterly destroyed and unemployment will rise to eventually reach the 20%+ level.

The balance sheet of the ECB makes the Fed look like the champion of austerity. So stimulus is by no means even possible for Europe. The entire continent is going down the drain and the flawed design of the Euro is to blame. We may have crossed the point of no return.

It looks like we will see a dollar rally into May along with the US share indexes. This is being driven by capital flows after the European Commission broke it promise no defaults. Serious capital can no longer trust anything said in Europe.