There’s no respite for the common currency: after dipping below 1.2873, the pair seemed to be staging a comeback, but the falls resumed in the wake of the US session.
It’s currently holding on lower support, but this isn’t a strong one. This happens as the clouds darken above Greece and Spain.
For a second week in a row, the pair opened with a weekend gap, this time to 1.29. And for a second week in a row, the gap wasn’t closed quickly – a bearish sign that led to more falls.
EUR USD hourly chart – Click image to enlarge
In Greece, last minute talks will likely conclude without an agreement on a government: the Democratic Left doesn’t want to be the single anti-bailout party in a pro-bailout government. SYRIZA refuses to join such a government, and is looking for a victory in all but certain second round of elections.
Discussions about Greece leaving the euro have heightened, and they reach the ECB. Germany is still very tough in its stance to Greece.
Spain: While Germany is tough on Greece, the European Commission is softer on Spain, and hints that deficit targets might be eased.
Yet Spanish yields are still on the rise, with the spread against German bunds breaking records: reaching 4.93% at the peak. The Spanish ministry of finance is already working on a dreaded Plan C for the economy.
Dip and Dead Cat Bounce
The European session saw a dip below 1.2873, but the break wasn’t confirmed with the choppy euro. The recovery attempt was similar to a dead cat bounce – didn’t go to far.
With the US joining in, the pair confirmed the break and reached a low of 1.2828, just 10 pips above minor support at 1.2818. Update: 1.2825 is the new trough.
More significant support is around 1.2770, which was temporary resistance in January. The lines lower are much stronger. See more lines and analysis in the EUR/USD forecast.
EUR USD Daily Chart – Click image to enlarge
