A continuation of Monday’s price action was the theme of the markets over the past 24 hours as the major instruments we monitor daily continued on the same mood. With only a few important reports from Europe and the US traders’ focus was on the Greek debt negotiations and their progress and that shows in the volatility and price action of the Euro since the beginning of the week.
What seemed to be a lost cause after weeks of little to no progress between Greece and its creditors now seems to lead to some kind of deal. The Greek government realized that steps need to be taken and further reforms are required for their partners to continue offering their help and during the last few days we’ve seen progress in that front.
However what seems to weigh down on the Euro and is responsible for the currency’s recent decline is the fact that analysts expect that a new deal will require some kind of extra funding from the ECB that will burden the Euro that is already undergoing a QE program. As such the Euro has lost more than 200 pips since the beginning of the week but we expect some of the losses to be recovered when a deal is brokered as enthusiasm will spread in the markets.
This morning the Euro is attempting to recapture the 1.1200 barrier having fallen as low as 1.1150 yesterday and if it succeeds we could see a correction possibly all the way to the 1.1250 area. The technical outlook remains bearish at this time and we should treat any possible moves higher as retracements at this point since we have no signs for a full bullish reversal.
The Cable extended its losses as well yesterday but on a far limited manner than the Euro, the UK currency is on a technical correction lower after an overextended rally that last 10 days and had driven the Pound to the 1.5900 area. The Cable came down to test the 1.5700 support floor and this morning is pulling back a bit higher with a view to test whether this decline was merely a correction or the start of a new bearish trend. Short-term resistance and pivot point is the 1.5800 level and if the Cable remains below that we could see a further decline in the days to come.
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