Despite the deal between the ‘Troika’ and the Cypriot Government, traders are not happy with the EUR and confidence is at a low as concerns no arise that bank deposits in the local banking sector are now vulnerable, and this is something that could spread to the rest of the euro periphery.
All those buyers on the run up to 1.3045 overnight have been stopped out as we crash through 1.2900, en route to testing and breaking support at 1.2880.
Adding to the questions on the viability of the Eurozone economy, the concerns regarding the financial sector are real and one must wonder whether it will need further support in the future. Add to that the uncertainties that still surround the lack of a government in Italy and the weight on the EUR is quite heavy.
But wait, there’s more!! Adding to the pressure in the EUR are comments from Cypriot Parliamentary Finance Chairman Papadoloulos that Cyprus must assess benefits of a euro exit. Really?? Those comments are ill advised and shouldn’t even be published. The EU has agreed to allow the Cypriot government to remain in the single currency and now Cyprus is wondering if that’s a good idea??
Then what seems like the “knockout punch” today was the release of Dallas Fed data. From a level of 2.2 in February, the Dallas Fed Manufacturing Business Index rose to 7.4 in March. And the US Chicago Fed Activity Index moved from negative territory at -0.49 (revised from -0.32) in February to 0.44.
That is plenty for a Monday morning. But adding to that there is the concern that liquidity may dry up sooner than normal, as traders keep one eye on their screens and the other eye on the “Weather Channel”. A storm is expected to hit the NYC metropolitan area later today and that along with traders leaving early for the first night of Passover could prove to have some erratic moves later today.
Bottom line, the EUR remains under pressure. A break of 1.2860 will be critical. There seems to be some buyers down here at the 1.2880 level for the time being.
More: EURUSD Could Fall Much Lower In 2013 (Elliott Wave Analysis)
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