Is the EU planning a short squeeze?

Excerpts from the Businessweek.

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European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the European Union’s central authorities with guarantees by national governments. Finance ministers will meet at 3 p.m. tomorrow in Brussels to flesh out the details. A press briefing is scheduled for 6 p.m.

‘That’s Significant’

“When the markets re-open Monday, we will have in place a mechanism to defend the euro,” French President Nicolas Sarkozy said. “If you don’t think that’s significant, you haven’t been to many EU summits.”

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While the fund may not be used to buy bonds as of yet, they could use the fund to buy EUROs. And this would provide a floor for the EURO unless speculators continue to short the EURO.

However, I do believe that the EURO is rich enough to protect its own currency from speculators. I believe they will keep buying EURO and selling US through swaps and somehow, this will cause a short squeeze of the EURO. Euro should go back to 1.4 by the end of the year. And when that happens, the stock market usually tends to go up too.