By: Christopher Lewis
EUR/USD continued to show weakness on Thursday as the Dollar bulls stepped into the market with full force. The bond auctions in the European Union went alright, but weren’t as oversubscribed as traders would have liked in France. While the auction went off without any serious issues, the fact that fewer buyers are stepping in makes the market wonder about the future as you might imagine.
The pair continues to show the effects of the debt crisis as the world gets rid of the Euro denominated assets at a dizzying rate. The pair continues to suffer from not only the obvious debt issues in places like Greece, France, and Ireland, but now has to worry about Hungary. The Hungarians are deeply indebted to the EU, and looks set to be a possible default waiting to happen. As a matter of fact, the Forint is absolutely collapsing as the Hungarians actually had to cancel some of their debt auction for the session as the interest rates demanded by buyers was simply too high for the country to pay. This could be the start of something very ugly for central European nations such as Austria who have lent quite a bit of money to the Hungarians.
EUR/USD Technicals
The EUR/USD managed to slip below the 1.29 level, an area that has been massive support over the last few days. The 1.30 area was the start of serious support all the way down to roughly 1.29 or even by some estimates the 1.28 handle. The pair is closing towards the bottom of the daily range, and this suggests that further weakness is coming.
.jpg "EUR/USD Daily 1/6/12")
The upside is protected by the 1.3050 area, as it looks so resistive. The recent trend should look set to continue as we have a bit of a channel that the market is following presently. We are not at the bottom of that channel yet – so the fall could easily continue for the session.
With today being Non-Farm Payroll day, the report could shake the markets. A gain of 152k is expected for the month of December in the United States, and a surprise could be a real mover. However, after any aftershocks, we expect that the trend of focusing on European weakness will continue either way.