EUR/USD is making a sharp move lower. After losing a minor support line, the pair is now heading for a third attempt on a stronger line.
France is on the line for a downgrade from S&P and so are additional euro-zone countries.
- EUR/USD loses support at 1.2660 and dives to 1.2636.
- According to Christopher Vecchio, this is far from being over. When the downgrade actually happens, it would trigger a cataclysmic sell off.
- Talks between Greece and the banks have broken off – this makes a Greek default very close and adds pressure on the euro.
- The downgrade is discussed on French TV.
Euro/dollar is currently at 1.2695. It dropped from the 1.2873 line earlier in the day and fell easily through minor support. It lost the gains made after Mario Draghi successfully calmed the markets yesterday.
1.2660 is critical support. It is a double bottom, after it was tested twice during the week. A two-notch downgrade for France, which is on the cards for a long time, could send the pair below this line.
It’s important to remember that also the EFSF, Europe’s bailout fund, will undoubtedly lose its perfect AAA rating if France loses it. The second part of the European core, Germany, is reportedly saved from a downgrade today.
Below 1.2660, 1.2580 is even stronger support. For more on the euro, see the EUR/USD forecast.Get the 5 most predictable currency pairs