FUNDAMENTAL ANALYSIS
The euro was hit heavily by the risk aversion which followed Goldman Sachs's fraud charge. It continued its slide on uncertainty brought by the shutdown of European air space and persistent sovereign risk fears.
Despite better than expected auction results for short term Greek bonds, long term debt failed to attract investors. As a result, traders question the government's capacity to finance its debt by itself and bet that it will have to rely on the €45 billion, 5% interest EU/IMF bailout package.
The long term fundamental outlook in Europe remains fragile. The financial status of other European countries such as Spain and Portugal keeps sovereign risk on the radar. The recent downgrade of Portugal’s and Greece’s credit rating pushes a full recovery to much later.
Economical data suggest a light recovery in the production and manufacturing sectors. Inflation resumes at a moderate pace as well, but the employment situation is particularly weak throughout the eurozone.
TECHNICAL ANALYSIS
The euro retraced from its 1.3678 high and is back under 1.3600. The 4-hour chart shows a sustained downward momentum and chances for a reversal are weakening. The next important support level is at April's 1.3282 low.
The daily chart shows a still healthy downtrend despite the recent choppy movements. The price remains near the 61.8% Fibonacci retracement of last year's up move and could be forming a downward channel. Another break down would open the way for a push down to the 1.3000 psychological level.
Resistance levels:
- 1.3691
- 1.3789
Support levels:
- 1.3416
- 1.3282
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