Forex Analysis Hampered By European Union

Disappointing economic news is pouring out of Europe like water from a bucket. The current state of affairs within the Euro zone has been dragging on U.S. stocks. The news has also triggered massive selling in the Euro. The Dollar and Yen have both been rising versus the Euro as investors seek safety in U.S. and Japanese bonds.

What's going on?

Fallout from the PIG countries is starting to infect the stronger Euro zone countries. Two of France's banking giants are facing huge write downs due to Greece and Spain's losses. Credit-Agricole said it will take a 400 million Euro ($536.7 million) write down on one of its Greek subsidiaries. Also, credit giant BNP Paribas received a downgrade on its stock. Standard and Poors cited loan losses in Spain's banking sector as the reason.

Forex analysts and Algorithmic traders are both calling for more losses in the Euro zone banking sector. Forex opportunities are abundant within this volatile sector. Forexegg.com has a great pair of trading tools to help in this time. The Price Analysis Tool gives a good projection of possible high and low ranges while the temperature chart helps to measure market volatility so you can pinpoint entry and exits.

Euro's Future in Question Amongst Forex Traders

There are whispers in the market of a possible "two tier" system for the Euro zone. France and Germany are considering a split in the Euro, with one "super" euro for the strong countries and the old Euro for the weaker. The strong countries include France, Germany, Holland, Austria and Finland. The weak are Greece, Spain, Portugal, Italy and Ireland. One source called it an "act of desperation." While still seen as a plan b, some governments feel they need to cut loose the dead weight, leaving the survival of the Eurozone and European Union in question.

Advantages of a "Two Tier" system

There are some advantages to splitting the Euro. The old Euro would remain with the weaker countries, and would decline against the new, "super" euro. This would aid the finances of the weak countries in terms of inflation and interest rates. The super Euro would then reflect the actual value of the stronger countries. The downside is that the weak countries would still have debts owed in "super euros" which could prove difficult to overcome. Also, if the plan were seriously considered, foreign investors of the weak Euro zone countries would start pulling out their money, further depressing already fragile economies.

European Central Bank

The European Central Bank is ramping up its efforts to control fiscal policies among its member countries. They are putting more pressure on countries in an effort to increase fiscal responsibility. European Central Bank President Jean-Claude Trichet says, "There are no easy answers to the solvency and competitiveness problems of southern Europe"••• "Governments must bolster the confidence of consumers and investors by sticking to tough fiscal goals."

In another move by the ECB to increase fiscal responsibility they want the member nations to open their books for review. The ECB wants tighter rein over its members. So far there has been little support for this plan. EU leaders have already agreed to some stiffer measures, due to start in the second half of this year. England has refused to open its budget to review before parliament ratifies it and the European Commission maintains that "there is no need for new institutions to monitor the old rules."