Spanish Downgrade - Risk On or Risk Off?

[lastninja2 10]

Welcome some thoughts on this:

 

The market spotlight is pretty firmly focused on Spain right now, and the rising prospect of an official bailout request - thus paving the way for ECB bond buying intervention. That in itself, I can say with confidence, would be a "Risk On" move, and I'd be happy to buy up EUR.

 

But in the meantime, what if a major rating agency i.e. Moody's downgrades Spain?

 

On the surface that would be bad news for Spain and a "Risk Off" development. But surely such a downgrade would make a Spanish bailout request all but inevitable - therefore paradoxically the downgrade is "Risk On".

 

I'm fascinated to see how the markets respond to a downgrade - but I'm not sure whether I want to be long or short EUR....

[TheNegotiator 13]

What's your take now LN?

 

S&P downgrade may nudge Spain bailout along - Market Extra - MarketWatch

[lastninja2 10]

6E sold off after S&P did their 2 notch downgrade of Spain after US cash close... damn shame I was not at my trading platform, I probably had turned off around 9:30pm, but who knew right?

 

But 6E has now rallied powerfully, recouping the losses and plenty more besides.

 

My take is this:

 

Big players are buying 6E whenever it dips, in anticipation that Spain will eventually concede they need a bailout. I recently drew comparison between the Spanish bailout officials and Baghdad Bob - do you remember him? Spain insist that they don't need a bailout and that the downgrade is not justified... peh... we'll see.

 

All that said, if Moody's downgrade Spain, and I am at my desk, I will be spamming sell 6E as fast as possible. The sell-off won't carry on forever... because the big guys will step in to buy it, confident in the knowledge that a bailout is due. But the knee jerk reaction will definitely be a sell. Just my view.

[TheNegotiator 13]

6E sold off after S&P did their 2 notch downgrade of Spain after US cash close... damn shame I was not at my trading platform, I probably had turned off around 9:30pm, but who knew right?

 

But 6E has now rallied powerfully, recouping the losses and plenty more besides.

 

My take is this:

 

Big players are buying 6E whenever it dips, in anticipation that Spain will eventually concede they need a bailout. I recently drew comparison between the Spanish bailout officials and Baghdad Bob - do you remember him? Spain insist that they don't need a bailout and that the downgrade is not justified... peh... we'll see.

 

All that said, if Moody's downgrade Spain, and I am at my desk, I will be spamming sell 6E as fast as possible. The sell-off won't carry on forever... because the big guys will step in to buy it, confident in the knowledge that a bailout is due. But the knee jerk reaction will definitely be a sell. Just my view.

 

Someone probably knew or more likely anticipated it. Look at the markets over the last few days. Fed and ECB are totally committed to destroying the value and confidence of currency (amongst others) so my view is that any selloff will be bought back and move us higher ultimately. Still I could be wrong. But you don't need to be 'right' to make money

[Obsidian 10]

recently, every bad news is an opportunity to buy euro...

eur/usd rose 1000pips just because of hopes..maybe it would go another 1000 more if something good actually happens :rofl: