The situation in Cyprus remains pretty much unchanged this morning. After yesterday’s parliament vote on the proposed bank levy that saw not one parliament member vote in favor of the bill, the EUR tumbled toward the 1.2840 level.
This morning, we have seen the EUR regain the 1.2900 handle as traders take back short positions. EU ministers chimed in with their comments after the vote yesterday noting their concern and disappointment at the outcome. I wonder what these ministers would be saying if it were their country, and their citizenry that were about to be taxed on their savings.
More: What’s next?
The ECB has remained quiet throughout this week regarding the situation in Cyprus. The ECB governing council will meet today. The outcome of the meeting could result in Cyprus getting more time to figure out a solution, or they could cut off liquidity to the Cypriot banks. Cypriot Finance Minister Sarris has gone to Moscow to present a plan to the Russians, who might provide aid to Cyprus. Russia is a major player in the Cypriot banking sector. This news has given some legs to the EUR move higher this morning.
Technically, all charts point towards the downside and will remain that way until resistance is taken out at 1.3020. If there is some agreement on Russian aid today that would certainly be considered EUR positive. A rejection of any kind by Russia, or any negative statements could send the EUR tumbling once again towards support at 1.2840.
Believe it or not, there are other currencies in the news this morning. GBP will be on stage this morning as Chancellor Osborne presents the budget today. Analysts will focus on whether this budget will call for greater bank lending to businesses that would help to strengthen the economy. Also on tap out of Great Britain today is the release of the minutes of the last Bank of England meeting. Attention here will focus on the vote to expand Britain’s asset purchase program. Lastly, job data is due today and a 5,000 fall in claims is expected, while the unemployment level is expected to remain at 7.8%.
Finally, this afternoon the FOMC concludes its two day meeting. While all expect the FED to keep rates and the open-ended QE3 unchanged, analysts and traders will be eager to note whether FED policy makers have been encouraged by the recent improvement in the US economy. No doubt, the job market will come into focus here. The FED also will release updated economic forecasts. The market is looking to see if the FED will raise GDP projection and lower the unemployment projection. All these questions will hopefully be answered during FED Chairman Bernanke’s press conference. An upbeat Bernanke would certainly aid both the US equity markets as well as the USD.
So the morning focus will be Cyprus, while the afternoon will be the FOMC. Pretty cut and dried. Regardless of the outcome in Cyprus, pressure should remain on the EUR moving forward. Many traders I have spoken to would look at an upward move in the EUR as an opportunity to get “short†the currency. As for the Bernanke press conference later today, nothing “earth-shattering†is expected. One would assume given the latest figures on the economy, that the FED chair will be “cautiously optimisticâ€
Further reading:Â Forex Analysis: EUR/USD Bearish Trend Drops to 50% of Prior Bullish Trend
