Bad Friday for EUR/USD – 3 Reasons

EUR/USD is continuing a gradual, yet very persistent fall. It pauses only shortly at support level and is now threatening to completely erase the levels of the past two weeks. 

Here are 3 main reasons for the drop of the euro, that may certainly continue beyond today.

1. Spanish Downturn: Spain’s unemployment rate doesn’t stop rising. It reached 23.3%. And now, the government projects an even higher rate in 2012. Spain is expected to see a deep, not mild recession, with a contraction of 1.7% in 2012. It defies Brussels’ deficit target of 4.4% and sets a goal of 5.8%. Spain is the euro-zone’s fourth largest economy. Spain is back in the scene. Big time.
2. Greek Default: The grefault is getting closer. Yet again, smiles were seen in Brussels, but a final green light for bailout funds wasn’t given. It was delayed in a week, and until then, at least 5 things could go wrong.
3. LTRO: The banks got nearly €530 billion of cheap cash from the ECB. They are more stable now, and this could be a good time to let Greece go. Worse still, this extra cash devalues the euro and moves outside of the zone. The second round of LTRO turns the indirect QE made by Draghi into a euro-debaser, like the US dollar QE did for the dollar. Kathy Lien shows what happened with the first LTRO.

EUR/USD Technicals

The pair had a double top at 1.3486. Since then, it dropped to struggle with 1.333 and then traded under this line and found support at 1.3280.

After 1.3280 was lost, it stopped to pause at 1.3212, but not for long. The next line is 1.3150, followed by 11.3050.

For more on the euro, see the EUR/USD forecast.

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