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EUR/USD could have a good start to the week, perhaps with a weekend gap, as the Irish cabinet made a decision to officially ask for aid from the EU and the IMF. The size of the aid package is expected to be lower than 100-120 billion euros that was expected. This will impact other currencies as well.

After a long cabinet meeting, Irish finance minister Brian Lenihan came out on Sunday afternoon and gave a radio interview in which he said the country will officially ask for EU / IMF. He said that the bill will be well under 100 billion euros and that details regarding the bailout request and the new austerity measures will be published quite soon.

The Irish government has yet to approve the request, and the negotiations with the international bodies will begin afterwards. In the interview, Lenihan said that not all the money will be used, but rather serve as guarantees. The goal is to calm down the bond markets and to allow the markets to continue operating. The Irish sovereign took over the banks, which have very deep problems, mostly due to the collapse of the housing market.

The Irish sovereign wants to avoid a collapse of its banks. The IMF / EU delegation has been inspecting the banks since Thursday. More details on Bloomberg.

EUR/USD closed the previous week at 1.3669, between the minor 1.3640 and 1.37 lines. The next barrier on the upside is 1.3830. See more technical levels and full analysis in the EUR USD forecast.

Also AUD USD will likely gain on this news as this sends traders to more “risky” currencies. Also GBP USD will probably enjoy progress in the Irish situation, as British banks are highly exposed to Irish debt. The US dollar and the yen, which are “safe haven” currencies, are likely to retreat.

It’s important to remember that the Irish problems aren’t over, and that the continent faces bigger debt issues, Portugal is marked as the next piece in the domino, and far larger debt problems come from a country probably too big to bail – Spain.

So, a good opening for EUR/USD won’t necessary be followed up later in the week.

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