EUR/USD Should Fall to 1 Month Lows

EUR/USD Should Fall to 1 Month Lows

EUR/USD Should Fall to 1 Month Lows

With the way things are going in Greece, the EUR/USD should not only fall to 1 month lows but even reach 1.08. By now it should surprise no one that at the time of publication we are STILL waiting on Greece. The deadline for the Greek Parliament’s vote on the reform proposals was supposed to be midnight and now there’s talk that it may not happen until tomorrow. We have long said that the risk of a no vote is a realistic one and even if they accept the proposals, it only allows new debt negotiations to begin. The debt negotiations could still turn sour especially after the IMF indicated that they cannot participate in a new bailout without debt relief for Greece – a point that the Germans have resisted aggressively. So the talks could break down again and for this reason we remain bearish euros. Tomorrow’s Eurozone trade and consumer price reports will take a backseat to the ECB meeting and Greek Parliament vote. If the Parliament votes yes, we expect EUR/USD to rally at which point we will sell into the rally looking for a pullback as the debt negotiations resume. With Europe still struggling to contain the Greek crisis, we expect cautious and dovish comments from the ECB.

Technically, there is near term support for EUR/USD at the July low of 1.0915 but the more significant support level is the May low of 1.0820. As long as the currency pair holds below the 50-da7 SMA at 1.1160 or 1.12, the downtrend remains intact.

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