By Russell Glaser – The EUR/USD fell below a significant Fibonacci level as the euro continues to be sold amid European debt fears.
In European trading hours the euro was weaker on the back of the European debt crisis. Contagion fears are rampant as economists and analysts attempt to identify the next European nation that may require financial assistance.
The release of an 85 billion euro bailout package for Ireland has not helped to ease situation. A potential split in the government coalition threatens to break up the ruling government and delay the passing of the next year’s budget which includes considerable belt tightening as required by the joint EU/IMF bailout package.
Irish bonds have also sold off as new European legislation threatens subordinate bank bond holders to take a haircut of 80% while senior bank bond holders remain guaranteed by the Irish government.
The EUR/USD fell to a low of 1.2979 before recovering to the 1.3040 level. The daily low coincides with a downward sloping channel line off the mid-November lows which should serve as a support. The drop also took the pair below the 50% Fibonacci retracement level for the June to November move at 1.3080. A close below this level will move the next target lower to the 61.8% retracement level at 1.2800.
The EUR/CHF is also down sharply at 1.2973 following an opening day price of 1.3095.
Dollar strength is less apparent today as traders appear to be focused on euro selling. The GBP/USD is slightly lower at 1.5520 from 1.5533. The USD/CHF is down at 0.9975 from 1.0002.
Euro weakness should continue into the New York trading session with US consumer confidence set to be released at 15:00 GMT. European Central Bank President Jean-Claude Trichet is due to testify at 15:30 GMT. His comments may offer a bit of respite for the euro. Federal Reserve Chairman Ben Bernanke is set to speak at The Ohio State University Fisher College of Business in Columbus, Ohio at 20:00 GMT.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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