EUR/USD lost support hours after Trichet’s press conference. It is now slowly but steadily moving lower. The next significant target is the swing low of 1.3838. Below this point, it’s the lowest level in 6 months.
Not only Trichet is to blame, but also more scary talk about Greece. Update.
EUR/USD has dipped below support at 1.3950 during the press conference, but that was very very temporary. Eventually it just dropped one leg lower, from the 1.4030 – 1.41 range to 1.3950 – 1.4030.
As expected, more falls came indeed. Hours later, a slow downfall emerged, and continues steadily, with the pair leaving 1.3950 well behind – currently at 1.3920.
Significant support is at 1.3838, the trough from July 12th. Below this line, 1.3750 is serious support, followed by 1.3630 and 1.3570. Currently, resistance is at 1.3950 followed by 1.4030. For more levels and analysis, see the euro/dollar forecast.
Here are recent statements about Greece that push the euro lower:
- German finance minister said that the next tranche of aid is “on a knife’s edge”.
- Robert Mundell, a Nobel prize winning economist says that a Greek default would cause a “monstrous run on banks”.
- Slovakia will discuss the expansion of the EFSF only in December, as fierce opposition emerges against helping Greece.
- The Finns reiterate again and again their demand for collateral from Greece.
- Greek CDS shows a 91% chance of a Greek default.
This doesn’t look good.
Another thing to examine is the floor that the SNB put below EUR/CHF, at 1.20 – a well guarded floor up to now. It also serves as a cushion for the euro against the dollar.
But this cushion is soft now. Well, at 1.2141, the EUR/USD can still fall sharply with breaking the floor under EUR/CHF.
Update: Ben Bernanke is speaking now. He doesn’t say anything new, only that the Fed has tools and is ready to use them. We’ve heard that before, and EUR/USD continues lower to touch 1.39.
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