EUR/USD fell back to the lower range as Greece nears a default. The new austerity measures suggested by the Greek government currently don’t have support within the ruling party, as voices discussing an orderly default mount.
Greece’s ruling PASOK party has around 5 or 6 members who oppose the new harsh measures. The prime minister, finance minister and other high ranking officials are acting to convince these members to change their mind, but there’s no majority at the moment.
The ruling party has a majority of 4 seats in the parliament, so currently the government had to back down and push back the vote to next Tuesday.
Even if these measures are passed, it might not satisfy the troika, which has doubts about Greece’s ability to really implement these measures and demands more. A permanent property tax, more job cuts and higher income tax are now on the cards.
EUR/USD is down to 1.3440, down from around 1.3550 earlier in the day. It lost weak support at 1.3485 and is getting closer to the stronger support line of 1.34. Further support is at 1.3350, in levels last seen many months ago. Higher resistance is now at around 1.3550.
For more about EUR/USD, see the euro dollar forecast.
For the first time, a member of the ECB also talked about a possible default. Klaas Knot from the Netherlands, said that he cannot exclude a situation where Greece defaults on its debt.
Earlier, EU Commissioner Olli Rehn said that “The EU will not abandon Greece or let it default uncontrollably”. Is he preparing for an orderly default?
Further reading: El Arian: Signs of Institutional Run on French banks