The EUR/USD pair continued to fall on Monday as the traders in this pair sold the pair off without hesitations. The markets have seen the 1.29 level give way now, and this signals another round of weakness. The pair is the center of the financial universe at the moment as the problems in Greece weigh upon the market.
The Greek elections were a complete blow to the idea of austerity, and now it is starting to look like the Greeks are going to leave the currency. The idea has set the markets on edge, and the idea of the currency melting down is a real threat now. The ratings agency Moody’s has downgraded over twenty Italian banks after the close of the stock markets in New York as well and this simply cannot be a good thing as well.
The European issues continue to haunt this market, and will for the foreseeable future. The 1.30 level was once a massive barrier to the bears in this market, but it simply seems as a thing of the past now. The level will more than likely hold as resistance, and should keep the markets lower over the immediate future.
With the Greeks having issues in the elections, the government looks likely to need another election as a coalition cannot seem to be reached. This would have the Greeks going back to the ballot box around June 11 or so, and this will lead to more uncertainty over the next few weeks. None the less, the election could easily bring in more leftist and far right members to parliament and create even more friction and deadlock in Athens. As this is the case, it looks very likely that we are heading towards a default, although it truly is up to the larger countries as to when it happens. More than likely we will see the Germans capitulate and throw more cash at the Greeks in order to stave off a massive drop in the economy on the continent.
The Euro simply cannot be owned at this point, there are far too many issues surrounding it. The price action on Monday was horrible, and the fact that the 1.29 level finally gave way we feel the back of the support has been broken. The 1.29 was the last remnant of the support level in our eyes, and we actually added to our short position during the session as well.
The 1.26 level looks to be the next major support level, and although there will be bounces along the way, the headlines should continue to punish the Euro going forward. This area is where we are aiming for at this point in time. The pair saw a massive triangle that broke down once we got below the 1.30 level and the measurement for the potential move form that read a move to the 1.25 level. Because of this, we feel that even the 1.26 level will give way eventually. However, this pair will more than likely continue to be choppy. We would sell rallies on signs of failure, and a break below the Monday lows.
Written by FX Empire