BETWEEN COLLAPSE AND TREND CHANGE

Aussie Dollar, Swiss Franc and Yen were the undisputed winners of last week's trading activities.

The Swiss Franc even touched the 1,13 area versus the Euro. Europeans, primarily Hungarians and Austrian, with Swissie mortgage financing are looking at the steady decline of the Euro in an increasingly nervous manner. Will the 1,10 area hold or are we looking at a direct decline/collapse to parity.

Obviously, the solution to or better the end of the US debt crisis will significantly influence the future currency developments. While IMF and the leading G8 countries urge the US to find a quick end to the persistent debt ceiling problems, both political parties use the ongoing debate for political pickering and pre-election positioning. It is undisputed that the current problem will be resolved, however, without a long-term agreement the same issue could become an explosive election theme in 2012 and could accompany financial markets for another few years.

While it is impossible to predict the market reactions next week, a continuation of the pattern 'reacting to the latest news' is foreseeable. While a quick dollar collapse at the beginning of the week could be followed by a recovery of the Greenback into next weekend, another scenario of an immediate recovery at the beginning of the week is also possible. In all events, any market action will be risky and strongly influenced by real-time news.

All eyes are on the leadership of the US Congress and the President, waiting for an agreement which will lead the US onto a path of financial long-term recovery.

Exciting trading days are ahead of us.

All the best
Gerhard