After losing a critical support line and making a deep dive, EUR/USD is making a nice recovery. Learning from the near past – fasten your seat belts for a fresh dive.
EUR/USD broke down under the 1.3423 earlier this week and made a sharp drop. In February, the pair was supported at this line several times, and eventually began a journey north. I then wondered if this is a rise before the plunge. Indeed, when EUR/USD failed to breach the important resistance line of 1.3850, it began a sharp fall that culminated in the break of 1.3423.
Reasons for drops and reasons for rises
This EUR/USD break was backed by the credit downgrade that Portugal received from Fitch, and with the ongoing Greek crisis. Well, good news for Greece: the European leaders reached an agreement involving the IMF in a bailout plan for Greece.
Jean-Claude Trichet, president of the ECB, opposed aid from the IMF, but now changed his mind. He praised the deal and expressed optimism. This optimism boosts EUR/USD from the lows of 1.3267 up to 1.3382 – nice recovery indeed.
You may say – now that Greek crisis is behind us, the Euro can surge. Well, these troubles are far from over. The Greek accord doesn’t solve all the problems in Greece and it isn’t alone, as seen in this Reuters article reporting about the Euro’s fresh rise:
“Basically, it seems the problem will be settled without much turmoil, so things should calm. The only concern is if more problems arise with Portugal and Spain,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.
European stock markets aren’t too excited by this resolution. Initial gains were erased.
EUR/USD technicals
The next significant support line for EUR/USD appears at 1.3080 – this is the line where the pair began the long term rise in 2009. After dropping almost 50% from 1.3423 to 1.3080, to 1.3267, this retracement is natural.
If the pair fails to top 1.3423 at the close of the week, more drops can be expected next week. So, 1.3250 provides a minor support line and 1.3080 a major one. Note that there’s a long way before the next support line of 1.3080.
If the Greek hopes do take over the markets and EUR/USD rides on a miracle and jumps over 1.3423, the next line of resistance is at 1.3530, followed by 1.3680.
American final GDP is the last significant indicator for the week. Will it push the Euro down?
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