A Game of Musical Currency Chairs: Which One Will Be The Last One To Collapse?

The spin media is out in full force today. The "news" now is that "Europe may already have passed its biggest stress test".

Bloomberg reports: "The euro has rallied 8 percent from a four-year low last month. Greece, Spain and Portugal have managed to sell 50 billion euros ($64 billion) of debt since May 10, when the need to save the single currency forced finance ministers to create a nearly $1 trillion rescue fund and the European Central Bank to begin buying bonds".

“The market seems to be much more convinced following the bailout that the euro zone is working and the peripheral countries will be able to finance their debt,” said Chris Kind, head of asset allocation at Frankfurt-Trust, which manages $17 billion. “This goes hand-in-hand with the appreciation of the euro against the dollar.”

The Euro has appreciated a little yes, or actually, has reversed a bit its depreciation, but how much of that has do the Euro being strong, or with the USD being weak again? The economic news coming out of the U.S. is dreadful and traders may simply know that QEII (quantitative easing round II) is coming, as evidenced by Bernanke's remarks yesterday.

Shall QEII happen, the USD will sink again. The Euro is not strong, by any means. It's a game of musical currency chairs. The question is which will be the last one to to collapse.