Euro affected on Greece crisis

Written by Research | 10 February 2010

Wide trading range for Euro

With the recent reports on Greece and other European countries as to their financial status, debt payments and deficits mounting in high levels have prompted to aggravate the EUR/USD situation as it headed lower to its initial support price of 1.3585 low last Feb 05, 2010.

However, even before that announcement the EUR/USD has already been heading south of the charts due to the continued strength of the US Dollar since December 22 and some FX price reversal price signals since the last quarter of 2009. Although, the negative sentiments could not be shaken out from the market place that made it bias towards selling the USD on the way up.

Until such time towards the end of the year 2009 and the beginning of 2010 when traders and some speculative sellers of the US Dollar threw in the towel where such market capitulation were seen. Position trades and investment shift from stocks to USD flight to quality made the US Dollar to move higher than most expected.

When the Euro came down on its support price of 1.3585 and the Bloomberg's most recent report on the 8 Billion short-sell of the Euro due to the European countries financial troubles with a particular attention to Greece. However, Germany's intention to provide assistance have made the EUR/USD pause from a high of 1.3840 and currently working at 1.3767 corrective move.

Such confusion are present in the market as the relationship of the USD with the lowered DJIA have made investors weary of what is next to happen. We do expect that the Foreign Exchange Market specially for the EURO to make some wild price fluctuations since a dramatic trading from 1.3585 to 1.3840 is wide enough for retail investors to get trapped in a volatile market.

From the most recent currency reports from Bloomberg stating that a lot of major particpants have given up their EUR/USD holdings since the sharp price movement lower have been made from its previous high of 1.4579 last January and the most current low of 1.3585 registered on Feb. 05. Some short sellers have taken a huge sum of Selling the Euro in exchange for US Dollars.

The market pyschology here is that a total amount roughly in the 8 billion Euros were sold off based on the Bloomberg report that prompted a bulk orders of sellers in the market. With that said, the correction currently experiencing in the market making a price recovery from its low of 1.3585 and currently working at 1.3785 as of this writing will make the sellers nervous and the tendency is for the prices to make some wild moves. How much tolerance a retail investors can take is the next big question.

Would it be well worth the risk to trade with this kind of market conditions?

The EUR/USD is rising just about .80% so far today from its opening price action in Asia and Europe at 1.3645 to the current working price of 1.3760. In the daily chart, EUR/USD is trading higher after bottoming at 1.3585, 8-month low level, reached Feb 05 as some earleir buyers throwing in the towel and fresh speculative buyers are taking in stoploss selling postions. Reading and analyzing the market behavior now is relatively more important as we did expect some major corrections when the EUR/USD touched its 1.3585 inital major support. The probability of the USDX is correct back down for technical and breathing purposes as it still forms its ladder-like upward momentum. As indicated in this daily USDX chart.

With Trichet’s early trip home from Sydney has made some hopes that the crisis in Greece will be averted. that led to some speculative movemnts for the Euro to strengthen which in fact is a total contrary analysis from the major down trend of the EUR/USD from the earlier weeks.

Support Prices are     at 1.3586 ( Feb 05 low )
                                    1.3424 ( May 18 low )
                                    1.3330 ( Jan 27’09 high )

Resistances are         at 1.4026 ( Feb 03 high )
                                    1.4194 ( Jan 25 high )
                                    1.4579 ( Jan13 high )
                                    1.4626 ( Nov low )