EUR/USD is on the rise and already poked the 1.30 line. There are reports that the Cypriot politicians may reach an agreement regarding the controversial bank levy after a dramatic week. The March 25th deadline of the ECB looms.
We already mentioned that any rise could be a sell opportunity. Is this a sell opportunity? Or are there reasons to be cheerful?
The EU wants to see 5.8 billion euros from a one time bank levy, in return for the bailout. The original agreement was for 6.7% on accounts up to 100K and 9.9% beyond.
Accounts of up to 100K were supposed to be insured in the EU. Even if the Cypriot parliament passes an agreement within the 5.8 billion euro framework, the 100K question is still important to watch: if money is take from the previously thought to be safe accounts, And even if the agreement protects accounts under 100K, the mere suggestion to tax these accounts already broke the sanctity.
When Cypriot banks open on Tuesday, it is fair to assess that money will keep flowing out of them, putting the banks in danger despite the deal.
In addition, many euro-zone citizens may fear that Cyprus is not necessarily a “special” case and money could begin flowing out of bank accounts.
A lot of damage has already been done. Add the ongoing recession as seen in recent PMI numbers, and the Italian political crisis, and this specific Cypriot related euro-rally could only be a “special” spike.
EUR/USD
The pair advanced from support at 1.2880 to resistance at 1.2960, and finally broke this line on the latest reports. EUR/USD is now trading at 1.2984, after momentarily crossing the 1.30 line.
If the pair breaks above 1.30, 1.31 is the next significant resistance. On the downside, 1.2805 provides important support. For more lines, see the EUR/USD forecast.
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