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I hope you all had an enjoyable weekend. The theme for Monday seems to be “risk off” as the EUR, CHF and AUD have all fallen against the USD following the news on the Cypriot bailout.

The EUR has taken a horrible tumble as early trading begins in Asia after the EU Council and Cyprus agreed on Saturday that depositors will be taxed up to 10%, 6.7% on amounts below EUR 100,000 and 9.9% on deposits above EUR 100,000 that will raise EUR 5.8 billion so that Cyprus will be eligible for an international bailout.

Taxing depositors is not the usual practice and this could get depositors in other debt ridden countries to move their money to EU banks in other countries such as Germany. This news created a run on cash machines on Saturday, since it is unclear whether banks will re-open Tuesday after a banking holiday on Monday.

Update:  Cyprus Government postpones vote

This will certainly be an ongoing story as we head through the Asian markets and into the European open tomorrow morning.

As far as the currency markets are concerned, The EUR opened at 1.3075 and has fallen as far as 1.2899. This move was fast and furious as stop loss sales fueled the downtrend.

The EUR has currently settled around the 1.2910 level, but I feel this is only the beginning. The turmoil in Cyprus is not over. Italy still needs a government. Spain has its own economic problems, and lets not forget Greece. A break of 1.2870 should get encourage further selling.

For more lines and analysis, see the EURUSD forecast.

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