By: Christopher Lewis
EUR/USD continues to soften up as the trading world worries about everything European. The session on Tuesday saw more selling of this pair, and there are plenty of reasons being bandied about the newswires for the session. While the exact nature can’t be known, there is a lot of attention being paid to the Thursday announcement of how many private investors are willing to participate in the “voluntary haircut” in the Greek bond markets. The softness is simply based upon a lack of “knowing” what will happen, and the unknown is always bearish for risk assets such as the Euro.
Of course, there are many other reasons that owning the Euro might seem a bit dicey at the moment. One couldn’t be blamed for shunning the Euro on the whole now, and the market seems unwilling to step out and take the risk that could be taken by owning the currency. Of course, there is one major question to be answered, even if the Greeks do get enough participation: Who is next? In other words, now that the Greeks were let off the hook for much of their debt – someone will want to write down what they owe as well. I find it impossible to think otherwise. If the participation rate is high enough, it won’t be the end of the situation at all, even though the market may act like it for a second or two. Of course, it may not – Non-Farm Payroll is the next day after all, and people will be paying attention to that as well.
Noisy Clusters
The level down to the 1.30 level simply looks congested, and as a result it is going to be difficult to take any sensible trade in this area. The 1.30 level simply must be broken to the downside for any bearish clarity, and rising higher would take a daily close above the 1.3250 level. Needless to say, this may not be the best week for EUR/USD traders, as there will be several forces pushing and pulling at the same time. Because of this – I am waiting for one of those two levels to be proven before getting involved.
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