EUR/USD Loses Uptrend Channel on Risk Aversion

EUR/USD traded in a steep uptrend channel (graph below). Starting with another reminder of debt issues from Ireland and with a contribution of weak American consumer sentiment, risk aversive trading sent the below uptrend support.

The Anglo-Irish bank is struggling to pay its debt. Now owned by the Irish government, the options for financing this debt don’t look good. The Irish government can  fund the huge debt and suffer from weaker growth. This isn’t likely.

Another option is to make a “haircut” – meaning that the bank will either default on debt or have owner absorb some of it – meaning that German and French pension funds will pay the price for holding the Irish bonds.

Another option is to use the European safety net to tackle it. In any case, this isn’t Euro-positive – yet another reminder that the debt issues cannot be put under the carpet.

This news, originating in an Irish opinion article, and in the meantime being denied, where the first blow on the Euro’s steep rise. Also other currencies suffered against the dollar.

As the mood turned to risk aversion once again, US consumer sentiment joined the club with a weaker than expected score – 66.8 instead of 70.2. At least for now, we’ve returned to bad US figures = stronger US dollar. Risk aversion.

EUR/USD dropped below the uptrend support line. It then made an attempt to get back into the channel. This attempt failed. A dip under the 1.3050 support line wasn’t confirmed at the moment.

The lines below are 1.2960, 1.2920 and 1.2840. Above, 1.3110, 13267 and 1.3435.