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EUR/USD is now moving deeper into the channel and below one more support line as the next tranche of Greek aid is still in the air.  

According to the leaders of the EU, the conditions for the 8 billion euro tranche have not been fulfilled yet. But perhaps this isn’t the Greeks this time -it might be due to the demand for collateral made by Finland.

Euro-zone finance ministers have met in Poland for the first time since the July 21 summit. This meeting is also attended by US Treasury Secretary Timothy Geithner.

EUR USD Down as Greek Tranche Stuck September 16 2011
EUR USD Down as Greek Tranche Stuck - Click to enlarge

EU Commissioner Olli Rehn said that the Finnish collateral is a “work in progress” and that Greece needs to fulfill the obligations in order to get the money by mid October.

The EU / IMF delegation already discovered a hole in the Greek budget. The new property tax was offered on Sunday was supposed to bridge the gap. There were already some statements earlier in the week that the “deal is done” after this property tax proposal, but now it seems that the EU leaders aren’t convinced with the Greek moves, or are having serious trouble with Finland.

EUR/USD now trades at 1.3770, under support at 1.3788, and back in the middle of the channel. It managed to escape the channel yesterday, when the dollar liquidity move was announced.

Further support is at 1.37, followed by 1.3630. Resistance above 1.3788 is now at 1.3838. It is important to note the band line, currently at 1.3695 on the downside and 1.3851 on the upside. The channel is moving up.

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

It seems that with or without the Finnish demand for collateral, leaders in the EU find it hard to believe that Greece can fulfill its promises, which are broken again and again. Perhaps it’s not Greece to blame, and these plans were unrealistic.

Does it matter now? Greece is very close to a default. The provision of US dollar liquidity yesterday could be a preparation for the Big Greek Default.

It could happen as early as this weekend. Similar to the announcement by S&P to downgrade the US credit rating, the best thing is to announce it early in the weekend when the markets are closed, and give everybody enough time to get their act together before the markets reopen.

What do you think?

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