By: Christopher Lewis
EUR/USD continues to be the focus of the Forex world as the debt crisis drags on and on. The Greeks are trying everything they can to drag out the situation as the political realities domestically are getting more and more heated. The populace is starting to demonstrate again, and the local police union has even made comments about wanting to arrest IMF and EU officials. In other words, the people are going to vote the politicians out that could very well vote for further austerity.
The Greeks have an election coming in April, and there is a real chance that the politicians that come to power then will be very much anti-austerity. In other words, there is little chance that the agreement that is being worked on will last any serious amount of time. Default is coming, and any realist can see this down the road.
The recent action in this pair has been an attempt to get in front of any deal that comes out, and it should be noted that when the rumors of a deal being agreed upon appeared last week, the reaction was muted. Perhaps the market has finally gotten to the point that the games are about to stop, or Europe will be punished severely.
The 1.3250 area is the 38.2% Fibonacci retracement level from the recent fall, and the failure at this level on the chart may perhaps not be an accident. The shooting star on Thursday was a sign that the pair was about to fall. The breaking below ushered in the bearish momentum and looks set to run back down to the 1.30 level. The level down there will be very important as if it gives way – we could see a return to the recent lows near the 1.2650 level.
The pair is one that I will not buy until the 1.35 level gets broken with a daily close, and I would suspect that this isn’t in the cards anytime soon. The debt talks are of course important, but there are so many other parts of Europe that give me reasons to sell going forward.