(As written for My Paper on 4 October 2011. Click here to enlarge)

Finance chiefs meet in Luxembourg this week.

The good news for the markets is that finance chiefs are meeting and discussing global issues more frequently. The bad news is that no concrete solution has been hammered out yet.

In the process, markets are continuing their free-fall.

The MSCI Asia Pacific Index declined 2.2% yesterday, extending a 9.5% slump last quarter that was the biggest since 2008. Not to be outdone, the Markit iTraxx Asia index of default risk headed for its highest close since May 2009.

Major Asian currencies were not spared as well.

Against the almighty greenback, the Malaysian ringgit sank to a 14-month low, while the Singapore dollar sank to a 10-month low. For the month of September, the dollar was the best performer amongst its peers advancing 8% in the Bloomberg Correlation-Weighted Currency Indexes.

Fear still rules the market with slumping growth and the debt crisis in Europe weighing heavily in traders’ minds.

The Euro had a short rally when markets opened this week on the back of two news.

Firstly, Greece announced that it would fire workers as part of its 6.6 billion euro austerity package. Although credible, the measures would leave a 2012 budget deficit of 6.8%, just shy of the 6.5% goal set with the EU, IMF and the ECB.

The second news was Germany’s decision to approve the EFSF expansion.  523 members of the Bundestag voted to increase the EFSF with only 85 voting against the decision. This tells us that future bailouts may be coming, with Germany leading the way.

While this was significant to warrant a cheer from the markets, the price of EUR/USD told a different story as the rally soon faded.

Figures from the Commodity Futures Trading Commission (CFTC) website tells us that Futures traders have in fact increased their bets that the Euro will continue to lose ground against the US dollar. The reported “net shorts” by large speculators like the hedge funds was 82,473, compared with net shorts of 79,460 a week earlier.

Indeed, for all traders out there, the trend is your friend until it bends.

Top News This Week

1. Interest Rate Announcement for Australia, Europe and UK. I expect all to pause rates.

2. USA Non-Farm Payrolls. Friday, 7 October 2011, 8.30pm. I expect figures to come in at 50k (previous figure was 0)

Trade Call

Short EUR/USD at 1.3380

On the H1 chart, EUR/USD has fallen over 350 pips in the last one week, touching the price of 1.3313, a nine-month low.

A level of Resistance is detected at 1.3388. Our bias is for a short, and we will enter once prices retrace and turn back down from the Resistance level.

Entry is taken at 1.3380, a few pips below the Resistance level. A protective stop is placed above the previous high and we will have two profit targets for this trade.

Entry Price = 1.3380
Stop Loss = 1.3465
1st Profit = 1.3295
2nd Profit = 1.3210