Thursday, February 23, 2012
Although Eurozone Ministers had approved the 130 billion Euro bailout package and came to an agreement on the Greek PSI (Private Sector Involvement), we surprisingly saw light trading volume and tight range-bound trading in the EUR/USD pair ahead of today's trading session. This consolidation is an indicator of the uncertainty and lack of conviction in the market over whether Greece will be able to fully implement their austerity measures before their March deadline. However, during today's Asian trading session, the pair broke out of it's 74 pip trading range and began to rally up to resistance at 1.3340. It was at this price where risk sentiment changed to the downside due to news coming out that the Eurozone had downgraded or lowered their growth forecasts to -0.3% for 2012, compared to the prior 0.5% growth forecast the region had previously submitted for 2012. This caused the EUR/USD pair to slide past the 1.3300 psychological support, and the same trend for euro weakness was seen across multiple euro crosses.
Friday, February 17, 2012
For the past two days, their has been strong risk appetite in the market due to optimism over a 2nd bailout package for Greece. Since Greece officials have already approved & voted for the necessary debt restructuring, this has given investors a reason to increase risk sentiment and move into higher yielding assets. The common currency has rallied along with other risk currencies against the US dollar following a bunch of strong economic data. The ECB has swaped its existing Greek bonds for new bonds and it appears that signs of securing a more stable Eurozone is on the horizon. However, the rally in the EUR/USD will not continue any further ahead of the weekend as further clarity on the details of a proposed Greek deal get released on next Monday. Traders have sought to close out existing positions and are unwilling to hold any bets over the weekend, so this may result in a retracement or correction in the trend, as institutions take profit.