The dollar is stronger across the board as the Greek debt crisis comes to a head with the failure of European finance ministers to come to an agreement for a second bailout package. Moody’s put three French banks on credit watch which compounded the negativity as the majors were all sold versus the USD.
The lack of a solution is beginning to press market participants as the June 20th self-imposed deadline nears. Euro zone leaders left the meeting with the major conflict between Germany and the ECB unresolved. Germany is requesting investor participation in return for additional bailout funds but the ECB is staunchly against any restructuring or haircut on Greek debt that would cause a credit event as defined by the major rating agencies.
Negative euro sentiment was compounded after Moody’s announced it was placing three large French banks on credit watch due to their exposure to Greek debt. While most expectations are for some sort of bailout package to be strung together, the risk stands for a Greek default and traders have taken up a defensive position in US dollars. The EUR/USD has shed a quick 2 cents since late yesterday afternoon in the New York trading session. 1.4250 is the 61% retracement from the May to June gains. The next support for the pair is found at the rising trend line from the January 2010 low at 1.4150, a level that coincides with the 100-day moving average.
Sterling is also down sharply versus the dollar and the GBP/USD could test the trend line off of the May 2010 low comes in today at 1.6200.
An overall dollar rally is carrying out with both the safe haven Swiss franc and Japanese yen rising to new weekly highs. The USD/CHF broke above resistance at 0.8470 and is encroaching on the 0.8550 resistance. Additional resistance is located from the falling trend line off the February high which comes in today at 0.8700. USD/JPY is testing its 20-day moving average. Further resistance can be found at 81.75.
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