By Fast Brokers – The EUR/USD has extended yesterday’s selloff, collapsing below 1.30 as negative psychological forces strike the Euro. If there were alarm bells, they would be ringing right about now. A perfect combination of events has now given investors ample reason to dump the EUR/USD after weathering headwinds from Greece for so long. Speaking of Greece, fresh austerity program protests have turned violent, casting the feasibility of implementing these measures in a pale light. Yesterday rumors circulated that Spain will need over 200 billion Euros to shore up its own finances. However, we stress that this news is purely speculative, yet significant damage has been done anyways. To make matters worse, Moody’s announced today that it is reviewing Portugal for a possible downgrade. The triple whammy has ratcheted up conversations of contagion and the fact that all eyes are on the EU doesn’t help matters much. In fact, the IMF president announced that the risk for contagion is considerable. So there you have it, a perfect storm of psychological forces have left the Euro at the mercy of fear. One needs to look no further than the EUR/GBP to gain an understanding of the extent of the Euro’s relative weakness at the moment. The fiscal crisis, if we may call it a crisis now, has finally bled into equity markets and the S&P futures look set to open today’s session lower again. Meanwhile, the U.S. advance non-farm payrolls number finally turned positive, coming in a bit stronger than expected along with an upward revision for the previous release. This gives investors even more incentive to rush to the dollar amid uncertainty, placing further downward pressure on the EUR/USD. The EU will light up the news wire again tomorrow with an ECB meeting on tap. Although it is highly unlikely that Trichet & Co. will tighten considering the circumstances, the ECB could try to calm the fire and allow the EUR/USD to settle. The UK will also have its parliamentary election tomorrow, meaning the FX markets should be in for an active 24-48 hours.
Technically speaking, the EUR/USD is now trying to stabilize along its psychological 1.28 level with key March 2009 lows not so far away. Although the EUR/USD gave up on 1.30 very quickly, if politicians can manage to calm the markets then the currency pair may be inclined to hover back towards 1.30 over the near-term due to its psychological significance. As for the topside, the EUR/USD faces a marathon of downtrend lines along with intraday highs and the psychological 1.29 and 1.30 levels.
Present Price: 1.2835
Resistances: 1.2873, 1.2914, 1.2941, 1.2965, 1.2995, 1.3019
Supports: 1.2819, 1.2803, 1.2779, 1.2755, 1.2728, 1.2701
Psychological: March 2009 lows, 1.27, 1.28, 1.29, 1.30
(click chart to enlarge)
Market Commentary provided by Fast Brokers.
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