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Euro Fails to Reflect The Optimism Of Greece’s New Loan Payout

January 22, 2013 in Forex Fundamentals and News

EuroEUR/USD moved in tight ranges since the markets opened yesterday. The currency pair remained over 1.3300 with the low of past 28 hours at 1.3302 and high at 1.3332. A very narrow range considering the recent high volatility in the foreign exchange markets.

Greece’s New Loan Payout

The Euro zone finance ministers approved a payout of €9.2 billion to Greece in during this month.

“The Euro-group notes with satisfaction that the MoU milestones for January, agreed between Greece and the Troika, have been achieved. In particular, an income tax reform has been adopted and end-user electricity prices for low-voltage customers as well as the levy on renewable energy sources have been adjusted. We welcome the commitment of the government to adopt a simplification of the income tax code by spring.”, the statement from Euro group mentioned yesterday.

Out of the approved €9.2 billon, 2 billion euros will be in cash for Greece government’s budget requirements and 7.2 billion will be in bonds to recapitalize the Greek banks.

Installments and timelines

The EU finance ministers had approved a payout of €49.1 billion under the second bailout package during December 2012. Out of this EUR 34.3 billion was paid during the same month. With this month’s payout of EUR 9.2 billion, the balance of last month’s approved sum is 5.6 billion and that will be paid in two installments during the coming February and March.

During November 2012 the Greece government had got 2 extra years until 2016 for spending cuts and balancing the budget which has been a condition for the rescue plans. The December approvals of €49.1 billion payout came with 4 proposed installments over 4 months to keep an eye on the progress of Greece to meet the guidelines for the bailout plans.

Euro remains subdued

As the Euro group meeting continues and there are some expectations of clashes about the efficient channeling of the European Stability Mechanism’s € 500 billion rescue funds directly to the banks, the Euro has been subdued.  Since the markets opened yesterday, the currency pair has been running in very narrow ranges against all major currencies.

EUR/USD price action in narrow ranges

Since yesterday Euro has been running in a very narrow range against the U.S. Dollar. During past 30 hours EUR/USD has seen a volatility of only 30 pips. EUR/JPY has seen slightly more volatility since the markets opened yesterday. The pair tried to break over 120.00 psychological level again but failed at 120.24. The subsequent fall to 118.88 was rather sharp but since then the currency pair has entered a sideways mode and the price action has been staying below 119.68 and over 119.00. Euro had shown some continuing strength against the British pound yesterday when EUR/GBP went as high as 0.8421 but lost steam ahead of the psychological level of 0.8500. EUR/CHF, which had seen some unexpected upward gains to the high of 1.2569 had dropped to 1.2388 but has been staying in a tight range between 1.2453 and 1.2392.


Markets Today – Euro Vs. U.S. Dollar

November 9, 2012 in Forex Analysis

The reports of unexpected fall in the U.S. trade deficit by a record jump in the exports added to the post election strengthening of U.S. Dollar against the Euro. The momentum of the fall continued and EUR/USD slipped down to the low of 1.2717.

United States Exports

The Exports of Goods and Services rose to record high in September to U.S. Dollar 187.0 Billion.

Let’s have a look at the historical data of U.S. Imports and Exports from 1960.

Historical Annual Trade of US - Exports and Imports

 Europe and Euro

As mentioned the previous Markets Today post, European commission has cut down the growth forecast for Euro zone to 0.1% from previous 1.0% for 2013. That makes the overall outlook for Euro further bearish.

While the bail out of Greece against the debt crisis still carries the uncertainties. Even though the austerity measure bill for cuts in the spending towards pension, wages and benefit were approved by 153 against 128 votes yesterday, the final decision on the bail will depend on the complete report of compliance to the bail out terms.

The unemployment in Greece went up record high and moved over 25% to 25.4%. The July figure was 24.8%. With further spending cuts the outlook remains gloomy. The bailout against the debt crisis is one thing but the side effects of further austerity measures of spending cuts will not help the unemployment issues and money flow at least in the near term.

Euro Vs. U.S. Dollar – The Price Action:

Let’s see some of the charts of EUR/USD to see how the currency pair has been moving:

EUR/USD Chart 1

Euro versus U.S. Dollar-1

The above weekly chart since May 2010 shows that during the first week of September the pair had broken the resistance of the price channel and had moved up strongly. The chart also shows that during a trend the support and resistances coming near the 5-week EMA. The upward move could not sustain and last to last week the 5-week EMA support was broken strongly.

 EUR/USD Chart 2:

Euro vs. U.S. Dollar -2

The above weekly chart of EUR/USD shows another interesting point. The currency pair had been in a downtrend for over 1 year. The trend which had started in the beginning of May 2011 and continued towards the end of July 2012 had found the support just over the strong psychological level of 1.2000. EUR/USD had a consolidation from the low of 1.2042.

Now why we still call it as consolidation is because of the resistance found almost exactly at the 38.2% retracement of the above mentioned downtrend. 38.2% retracement after such a great fall is a very common phenomenon. The above weekly chart shows the classical example of 38.2% reversal and the resistance and fall from there.

EUR/USD – What to Expect:

As mentioned in the previous outlook, the 200-day SMA support is near   1.2680. We would expect at least some more deeper moves towards that support level. In case a break of that support takes place then some deeper decline towards 1.2610 or more may take place.

Euro – U.S. Dollar Chart 3

Euro versus U.S. Dollar-Chart 3

Any decisive break over 1.2885 will neutralize the above outlook for the near term, though a better confirmation would come with a decisive break of 1.3000 psychological level and then a break over the recent high of 1.3168.

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