EUR/USD is trading at a new low closer to New Year’s Day: 1.2153 is the new level as the pair continues to slip.
The latest event is Greece going to the polls, but it’s also part of the ongoing trend, which is certainly a friend of the dollar, but no friend for the euro.
More: Is 1.20 Imminent in EUR/USD as Greece votes? – UBS, ANZ
Some background
EUR/USD has been falling quite constantly since it almost touched 1.40 in early May. Draghi then said that action from the ECB was coming in June. Indeed, the ECB then cut the interest rates, including a historic negative deposit rate and announced additional easing steps.
A similar move followed in September, with rates reaching 0.05% for the main lending rate and -0.20% for the negative deposit rate. Despite rates reaching their lower bound and a weaker euro, inflation remained low.
Low inflation was exacerbated by a falling oil prices and a slowdown in Europe, with the tensions in Russia partly to blame. In December, Draghi made heaver hints of QE in early 2015 – the ultimate weapon to stimulate growth, employment and inflation while pushing the level of the euro substantially down.
Debt crisis returning?
The third and final vote in Greece’s presidential elections ended in a failure for the government. This implies elections in the debt struck country as it faces tough negotiations with the troika over the bailout program.
And the anti-bailout / anti-austerity SYRIZA party is set to win the elections. This uncertainty sent the Athens stock market plunging, and also weighs on the euro.
EUR/USD Levels
As the words come out of the keyboard, the pair extends its falls below the 1.2150 line, which support back in 2012. If this break is confirmed, the next level of support is the critical one: the July 2012 low of 1.2042. This is the low point where Draghi offered his “whatever it takes” speech.
The obvious level below is 1.20, which is a very round number, last seen in 2010. 1.1876 was the low at that time, May 2010. Even lower, we have the launch level of the pair: 1.17.
On the top side, 1.2250 works as resistance.
More:
- EUR/USD To Fall To 1.12 Without QE Or 1.05 With QE – Morgan Stanley
- EUR/USD To Start Its Descent To 1.15; We Stay Short – BNPP
Here is the chart:
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