The Irish bailout has been agreed and, to my surprise, the Germans have backtracked on their demand that bondholders should share the pain of a sovereign bailout after 2013. This is what kicked off the current little crisis but, as I said a couple of weeks ago, it was a catalyst for the market to react to a portmanteau of worries (which made the problem hard to pin down).

What will happen today? I am short EUR/USD. The USD broke out against everything on Friday, a pretty good indication that there is a trend of USD strength. On the other hand, the EUR could rally and PIIGS sovereign spreads could fall from what becomes a crisis peak. Which of these effects will be stronger, and thus whether my stop will be hit, I have no idea.

Update: It seems loss-sharing has been downgraded from a requirement to a possibility. Is this the kind of shock-and-awe news that seemed needed last week to turn the crisis around? At the moment I tend to think not.

Update2: Mohamed El-Erian agrees.