The EUR tumbled in the Asian trading session both versus the USD and in the crosses but later recovered from its lows. An escalation of the Greek debt crisis is taking place as events both over the weekend and today is intensifying the crisis. An explosion at a French nuclear power plant also added to the negative market sentiment. French banks have been hit particularly hard with fears of a credit rating downgrade weighing on the financial.
European bourses are trading deep in the red with the French CAC 40 leading the way down by-4.85%. Expectations of a downgrade by Moody’s is weighing on the financial sector as the banks are said to have some of the largest exposure to Greek banks with exposure at EUR 65 bn according to the Bank for International Settlements.
It appears the Greek debt crisis has intensified over the weekend with comments coming from sources from both the G7 and within German Chancellor Merkel’s coalition hint at Europe’s doubtfulness that Greece will be able to stave off a default. Yields on the Greek two-year note climbed above 60% today to a new all-time high while safe haven German 10-year bund yields fell to a record 1.709%.
Speculators have now turned bearish on the EUR with the most recent CFTC Commitment of Traders Report showing futures traders net short -7,683 contracts.
At the opening of trade this week in Asia the EUR/USD gapped lower and fell as low as 1.3500 but the pair has since recovered to close the gap and trade back at 1.3675. This is an important level as the price coincides with 61% Fibonacci retracement from the Jan to May move as well as the previous support line from the May and July lows. The next identifiable resistance is back at the broken trend line at 1.3990. Should the pair fail to move above this level the next support level is the pivot from February 14th at 1.3430.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
