EUR/USD Technical Analysis Outlook - Falls Continue On Crisis Complications

Further levels in both directions: Below 1.4030, 1.3950, 1.3860, 1.3750, 1.3440.

• Above: 1.4160, 1.4282, 1.4375, 1.4450, 1.4550 and 1.4650.
• Critical support is at 1.4030 above the round number of 1.40. Another strong line is 1.3950.
• 1.4160 now turns into resistance.

Euro/Dollar free falling -

EUR/USD Fundamentals

• 9:00 European CPI. Exp. 2.7%. Actual 2.7%. Core exp. 1.6%. Actual, only 1.5%. No second round effects?
• 9:00 European Employment Change. Exp. +0.2%.
• 12:30 US Unemployment Claims. Exp. 421K.
• 12:20 US Building Permits. Exp. 550K.
• 12:30 US Housing Starts. Exp. 540K.
• 12:30 US Current Account. Exp. -126 billion.
• 14:00 US Philly Fed Manufacturing Index. Exp. 7.1 points. See how to trade this event with EUR/USD.

 

FOREX-Euro at 2-1/2-week low vs dollar; Greece in focus

The European Central Bank said the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability. “Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt today, when presenting the bank’s semi-annual Financial Stability Review. “That’s the reason why we are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event.” The euro area’s sovereign-debt woes have worsened as investors increased bets that Greece will not be able to pay its debts, sparking the region’s first sovereign default. The risk that euro-area banks holding Greek government bonds will be saddled with losses has jumped, after Standard & Poor’s slapped Greece with the world’s lowest credit rating on June 13. "The euro area faces a very challenging situation that comes mostly from the interconnection of the sovereign debt crisis and the situation of the banking sector,’’ the ECB said in the review. “In light of the potentially very dangerous implications of sovereign-debt restructuring for the debtor country, including its banking system, a determined and unwavering focus on improving fundamentals” is required.

Vienna Initiative

The ECB and the German government have clashed over how much investors should contribute to alleviating Greece's debt load, which reached 143 percent of gross domestic product in 2010. While the German government has argued for an extension of the maturities of Greek bonds, the ECB has said it’s against anything that could be interpreted as a default.

Constancio reiterated that the ECB is in favor of a plan for bondholders to agree to roll over their debt voluntarily. The approach is modeled on the Vienna initiative, where banks agreed to roll over loans to units in Eastern Europe at the height of the financial crisis in 2009. “We are not against all forms of private-sector involvement,” he said. “Some sort of Vienna style initiative could be conceived. It’s not for us to provide solutions.”
While Ireland and Portugal were also forced to ask for external help over the past year, the ECB said there are“encouraging” signs the crisis has been contained.

FOREX NEWS: Euro Falls to Lowest This Month Versus Dollar on Greece Bailout Deadlock

The euro dropped to its lowest level this month against the dollar as the European Union struggled to break a deadlock on a second Greek financial rescue. Europe’s shared currency remained weaker after the cost of living in the U.S. rose more than forecast in May and a measure of manufacturing in the New York region unexpectedly shrank in June. Sterling fell versus the dollar after a report showed Britain’s jobless claims rose in May more than economists forecast. Australia’s dollar fluctuated after the Reserve Bank of Australia’s governor said policy makers will need to increase interest rates. “The fact that the data is very poor gives market participants more of an excuse to continue to unwind their euro long positions,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “There is contagion risk in Europe and it’s acting to weigh on the euro, or boost the dollar.” A long position is a bet that an asset will increase in value. The euro fell 1.1 percent to $1.4289 at 9:26 a.m. in New York, from $1.4440 yesterday, after touching $1.4264, the lowest level since May 30. The currency slid 0.7 percent to 115.42 yen, from 116.23. The dollar gained 0.3 percent to 80.76 yen, from 80.49, after touching 81.06, the highest level since June 2. Europe’s currency has depreciated 1 percent in the past week against nine other developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has risen 1.3 percent. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece. Standard & Poor’s lowered Greece’s credit rating on June 13 to the lowest among nations. EU finance ministers agreed yesterday to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new plan for Greek aid. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default. Moody’s Investors Service placed the ratings of BNP Paribas SA, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA on reviews that will focus on their holdings of Greek public and private debt.