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The endless talks between private bondholders of Greek debt are probably really making progress this time. Reports about an agreed draft are emerging after 3 intense days of talks.

The relief for Greece may be limited, but EUR/USD rises once again.

At this time last week, EUR/USD was crashing. S&P downgraded 9 euro-zone countries, and this managed to overshadow news about the breakdown of talks between Greece and its private bondholders.

This Friday is different. After talks resumed, a deal might be in hand. The draft discussed between the two parties has reportedly  been approved by the EU.

A deal on a 50% voluntary haircut is necessary for the second bailout program for the debt struck country, and necessary for preventing a disorderly default in March.

EUR/USD is rising in range once again. After losing the 1.2945 line, it found support above 1.2873 and rose once again. A first attempt on 1.2945 didn’t succeed, but the pair is quite close.

It is very important to remember that a 50% haircut on Greek debt is not a reduction of the Greek debt mountain by 50%. Apart from the private sector, a lot of bonds are held by the Official Sector: the European Central Bank and the IMF.

A far better solution for the Greek debt issues would be if the ECB would accept to take a hit on its bonds. Mario Draghi didn’t reject this in the last press conference.

Will Europe take the extra step this time?

Probably not, and this may limit any rally.

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