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EUR/USD failed to break a line of resistance within the uptrend channel, and the downfall was sharp. It eventually lost uptrend support and is now struggling on lower ground.

The never ending Greek troubles are the main reason among 4:

EUR/USD tackled uptrend resistance earlier in the week but couldn’t break above this line. The peak was at 1.3234. The break above 1.3212 proved to be short lived and false.

After falling to the middle of the channel, the pair rose again and this time bounced off the 1.3212 resistance line. As seen on the chart, uptrend support was lost and the pair hardly managed to climb back above support at 1.3060.

Reasons for the fall

  1. Greek PSI talks stuck: The parties discussing the Greek haircut are “close” to conclusion for quite some time, but they aren’t cutting the deal. This is a pre-condition for the second bailout for Greece. Without additional aid, Greece will default in March. The markets are losing patience.
  2. Portuguese domino awaiting: The pattern that will be seen in Greece will most likely be followed with Portugal. While the situation is better, a restructuring of Portuguese debt can be easily seen later in the year. Portuguese bond yields and CDS are reflecting a high chance of default.
  3. Weak data: German retail sales, French consumer spending and also some under-than-expected US numbers elevated the risk-averse atmosphere.
  4. End-of-month: All sorts of fixing kept the pair high, but after the dust settled, the bad news kicked in and hit the euro.

If the tough line of 1.3060 is broken, minor support is found at 1.30, followed by more important support at 1.2945. Weak resistance is at 1.3145, with stronger resistance at 1.3212.

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