By Mario Sant Singh
Fears of a Greek exit roiled the markets last week, with EUR/USD falling over 200 pips on the news of Greece's failure to form a ruling coalition last Tuesday.
The news shocker also sent Spain's 10-year bond yield to a five-month high of 6.5 per cent and Italy's 10-year bond yield to 6 per cent, the highest since Jan 30.
This week, a quick check on the bond market showed that the four countries in the "danger zone" - Greece, Portugal, Spain and Italy - had a widening yield spread versus German 10-year bonds.
Over the weekend, Chinese Premier Wen Jiabao pledged to focus more on bolstering growth.
This caused Asian stocks to rally yesterday, rising from a five-month low.
Although China's pledge can be taken as a bullish sign by the markets, it is prudent for traders to keep their eye on the big picture, which is centred on the euro zone.
Hence, any temporary rally in the markets is, in fact, an opportunity for us to go short, rather than long.
Top news this week
Britain: Revised gross domestic product figures on Thursday.
I expect figures to come in at -0.3 per cent (previous figure was -0.2 per cent).