EUR/USD Tests February Lows as Greece Fears Reignite

The EUR/USD has dipped back below its psychological 1.35 level and is testing February lows as uncertainty in Greece regains steam.  S&P and Moody’s warned that they may downgrade Greece’s debt by the end of March should the government not successfully implement its austerity plan.  Meanwhile, Greek government officials are throwing verbal grenades at Germany, effectively harming ties with the country Greece may need to rely upon for a bailout.  The deteriorating relationship between the two countries is stoking speculation that Germany may leave Greece to its own devices to correct its economy or go to an outside source, specifically the IMF.  Regardless of the lasting effects of the spitballs flying around, today’s developments are having a negative impact on the risk trade.  The EUR/USD, Cable, AUD/USD, and USD/JPY are all heading south in a clear signal that investors are heading for safety.  Exacerbating today’s move is a disconcerting rise in U.S. weekly unemployment claims along with mixed durable goods data.  Although the headline outpaced expectations, the core number disappointed.  All that being said, the EUR/USD is holding up relatively well thus far, likely a result of encouraging German Unemployment Change data.  The Euro’s comparative strength is highlighting by another solid step higher in the EUR/GBP.  Meanwhile, the data wire won’t slow down with U.S Prelim GDP and Existing Home Sales due tomorrow.  Additionally, the EU will release some CPI numbers.  Should EU consumer prices print poorly then the EUR/USD could experience further downward pressure in the anticipation that liquidity tightening is not in the picture for the foreseeable future.  After all, it’s difficult to imagine tighter liquidity with the fiscal issues in the PIIGS nations.

Technically speaking, the EUR/USD faces multiple downtrend lines along with 2/24, 2/23, and 2/17 highs.  As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with 2/19 lows.  Furthermore, the psychological 1.35 area could continue to have an impact on price movements.

Present Price: 1.3473

Resistances: 1.3493, 1.3516, 1.3546, 1.3572, 1.3594, 1.3634

Supports:  1.3458, 1.3440, 1.3420, 1.3394, 1.3377, 1.3358

Psychological: February lows, 1.35

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