By: Christopher Lewis
The EUR/USD pair has been very bearish over the last several sessions, and Thursday many be a catalyst for yet another move. The Greeks will announce the participation rate in their haircut process for their debt, and this could possibly move the markets in a violent way. However, there is also the possibility that it could be a quiet session as the Non-Farm Payroll report is tomorrow.
The participation rate will have to be fairly dreadful for this pair to move with any real conviction in my opinion. I would suppose that the natural premise of the market is to believe in the ability of the private bondholders to accept the “haircut” offered by the Greeks. The announcement comes out at 3 pm Eastern Standard Time, (New York) and the markets may simply sit still before then.
The action that we have seen could be a simple winding up for the next move, but the smart money will look to both the Thursday and Friday news in order to buy or sell this pair going forward. Forget about the obvious problems in the European Union, the markets obviously aren’t paying attention that far out into the future.
Support cluster
The market is currently sitting right in the middle of a support cluster, and it is because of this that I would be more impressed by a sharp selloff than a move higher. The 1.30 level below continues to offer support as well, and it is below that level that I am looking to sell this pair if we get that move. However, on the upside the pair isn’t limited until we get to the 1.35 handle.
.png "EUR/USD Daily 3/8/12")
The breaking lower would mean much more to me than a pop higher that will undoubtedly be based upon Greece being “saved”. However, sooner or later someone will ask the follow question, “Who is going to lend to Greece now?” The answer is nobody. This problem is far from over. I still believe in the bearish case, but we need to clear the barrier below first in order for me to get involved.