The details of the bailout plan sent the Euro far up on a weekend gap. While the gap isn’t filled, the troubles are far from over, and a new fall can happen anytime.
30 billion euros from the European Union in safety net money were promised to Greece just before the markets opened. This caused dramatic weekend gaps that sent EUR/USD to 1.3690. Although the pair calmed down since then, the Euro is still far from Friday’s closing price of 1.35. But caution should accompany this optimism.
As Casey Stubbs states, Greece is a currency killer, and the positive attitude from the zone’s biggest countries also mean that Greek problems are European problems, in every way. This applies to the next problematic countries:
While this plan alleviates the immediate fears of a Greek default it doesn’t change the immediate term outlook for the euro zone countries. These countries still lag behind other developed economies in terms of recovery from this current recession. Both Spain and Portugal are facing the specter of increasing deficits and the political and economic difficulties of implementing austerity programs of their own.
I agree with Casey’ analysis and conclusion that the long-term trend for the Euro is still down. The implementation of the plan also shows there lots of room for caution. The first bond auction was successful, but Greece had to pay a high yield.
The road to recovery in Greece is still long, and the meaning of this plan is that other weak countries will continue leaning on the stronger countries. This might be good for political unity, but not for the currency.
The first support line is the gap – EUR/USD is supported at 1.35 – Friday’s close. This is an important line to watch. 1.3380 also provides support, but more minor. The ultimate support line is at 1.3267, the 2010 low.
A rise of EUR/USD will meet initial resistance at 1.3692, and stronger resistance at 1.3780. The most important resistance line appears at 1.3850, a place that the pair failed to break and collapsed since then.
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