Euro Pops On Possible Greek Deal
Today’s Spotlight Market
The Euro is slightly higher versus the US Dollar this morning, after CNBC reported that EU leaders and Greece have agreed to a restructuring of Greece’s bailout, in principal. Other news agencies have downplayed the CNBC report.? While the country is far from being a symbol of economic health, Greece leaving the Euro currency and, possibly, the Eurozone would have had extremely negative consequences for all parties. There seems to be no choice for European leaders but to bend to Greece’s demands, as the Eurozone seemingly has more to lose. The question is how far will they bend?
Fundamentals
Greece aside, Europe continues to have growth concerns, which could result in additional weakness versus the greenback. Eurozone industrial production stalled in December after three months of gains. This is not as negative as it may seem on the surface, as a steep decline in Ireland wiped out production gains in Germany, France and Italy, the Euro bloc’s largest economies.? Friday?s GDP data may provide a clearer picture for traders. Many are expecting the EU to maintain the paltry 0.2% growth rate from the third quarter.? Regardless of the outcome from the Greek talks, many are expecting parity between the US Dollar and the Euro at some point this year. The US economy had plenty of flaws, but they are overshadowed by Europe’s shortcomings. The geopolitical situation, especially with regard to Russia and Ukraine, suggest investors may also flock to the greenback as a defensive play. Time will tell whether or not this comes to fruition.
Technical Notes? -? View Today’s Chart
Turning to the continuous Euro chart, we see the front month March contract consolidating between the 1.1000 and 1.1500 levels.? Prices have tested and failed to break the 20-day moving average on the upside.? Prices have been tightening in what appears to be a triangle/pennant formation, hinting at a possible continuation of the downtrend.? If the Euro does see a downside breakout, the next support area comes in around the 1.0500 level.? Looking at the RSI, we see the indicator moving back into neutral territory.? It is interesting to note that the RSI had bottomed in early January, before the recent relative low.? This could be a signal that the market may be set to reverse.
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