By Fast Brokers – The EUR/USD has plunged beneath previous March highs in reaction to IMF involvement in Greece’s financial assistance becoming more likely. France is beginning to turn Germany’s way, favoring IMF involvement on a certain level, and not until Greece is unable to attain financing on its own two legs. Investors reacted negatively to the news, sending the EUR/USD back to levels not seen since May 2009. Adding to the EUR/USD’s downward momentum was Fitch’s announcement that it is lowering Portugal’s credit rating to AA-. The fear of more PIIGS nations needing financial assistance when the EU has failed to come up with a plan for Greece has sent investors scurrying towards the Dollar for safety. The EUR/USD had been stuck in a trading range for a while, albeit a wide one, and today’s large pullback could signal that the EUR/USD is in for yet another leg down. Today’s negative EU debt news had led investors to dismiss an altogether encouraging day of economic data from the EU. The Flash PMI figures and German Ifo Business Climate number showed that economic activity is still on the path to recovery, at least in Germany and France. Although today’s data has been dismissed thus far, it could help the EUR/USD stabilize once the impacts from today’s negative psychological events exhaust themselves. Meanwhile, the Dollar is gaining across the board while gold ducks back below $1100/oz. Hence, a clear message of risk-aversion has been delivered. U.S. DGO data printed mixed, with the core outperforming while the headline disappointed. Therefore, although auto purchases are cooling, consumption is continuing to show improvement. Investors are presently waiting for U.S. New Home Sales data, and it will be interesting to see how this figure fares since it has been on a steady decline for some time now. If New Home Sales should outperform, this could benefit the Dollar due to speculation that the Fed could raise sooner than anticipated.
Technically speaking, the EUR/USD clearly faces a multitude of downtrend lines due to the extent of today’s pullback. Since uptrend lines are sitting far below, the EUR/USD’s objective now becomes to set a new base, which could take a little while barring a positive reaction to this week’s EU summit. The EUR/USD now has March and April 2009 levels serving as supports/resistances.
Present Price: 1.3344
Resistances: 1.3372, 1.3391, 1.3410, 1.3447, 1.3473
Supports: 1.3340, 1.3320, 1.3300, 1.3284, 1.3268, 1.3245
Psychological: March lows, 1.33
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