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After breaking below the 1.4030 support line, Euro/Dollar continues lower and has just pierced through the round number of 1.40, eyed by many. It is quickly approaching the next support line. There are multiple reasons:

  1. Weak German PMI: The initial numbers for Europe’s powerhouse were significantly weaker than expected.
  2. Spain’s political mess: the ruling party lost regional elections. Protests against all parties continue on the streets. Spanish bond yields are just under the all-time high of 5.60%
  3. Italy’s got a credit warning over the weekend. This is serious – Italy is Europe’s second largest country.
  4. Greek re-profiling: The Greek prime minister ruled out restructuring but not re-profiling. This game of words only delays the inevitable default.
  5. Oil prices are falling – this helps the US dollar.

The next support level is at 1.3950, followed by more significant support 1.3860.

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

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