EUR/USD Back Through 1.0700 On Greece-Deal Hope
Matthew Weller | Apr 23, 2015 10:47AM ET
At the start of the week, we noted that it has now been an entire half-decade that Greece has been the epicenter of the Eurozone’s financial headlines. In our conclusion to that report, we stated that “euro bulls will be looking to see if Eurogroup policymakers moderate their rhetoric heading into Friday’s crucial meeting, but if nothing changes, EUR/USD could reverse last week’s gains and retest key support at 1.0500.” Earlier today, it looked as if the bearish situation would play out, helped along by today’s uniformly disappointing Eurozone PMI figures, but euro bulls caught a break of sorts ahead of the US open. Just a few hours ago, an anonymous Greek government official stated that the deal was “very close.” On the other side of the fence, EU Vice President Valdis Dombrovskis stated that the European Union was “ready to reach an agreement with Greece,” though technical talks would like stretch into “May or so,” beyond the original April 30 deadline.
The slow rate of progress in the debt negotiations is certainly not a favorable development for the euro per se, but the willingness of Greece’s creditors to relax its deadline at least shows that all parties remain committed to keeping Greece in the Eurozone for now. Indeed, the newest concern to hit financial markets is the risk of “Grimbo” (Greece in Limbo), or the idea that the ongoing stress on Greece’s balance sheet could prompt another round of elections and a further delay to any sort of resolution to Greece’s fiscal position and position in the euro. Needless to say, any prospect of further uncertainty in Greece could limit EUR/USD gains over the medium term.
Technical View: EUR/USD
For now, traders are drawing inspiration from the short-term signs of progress in Greece’s debt negotiations, and EUR/USD is rallying as a result. The pair found clear support at the 1.0660 level on Tuesday and again earlier today, suggesting that we could see more strength in the near-term as long as that support level holds. The RSI indicator formed its own corresponding double bottom near the 40 level, bolstering the perception of support just below current rates.
The situation remains fluid as we head into tomorrow’s Eurogroup meeting; no deal is expected at this point, but signs of further progress (even if it is just another “kick the can down the road” type of solution) could extend the relief rally in EUR/USD toward the Fibonacci retracements at 1.0840 (61.8%) or 1.0925 (78.6%) next week. On the other hand, a negotiating impasse could drive EUR/USD back down to its weekly low at 1.0660 or even the bottom of the 6-week range at 1.0500.
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Source: FOREX.com
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