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18 Mar 2013
It’s only Cyprus!!
FXstreet.com (Barcelona) - Market sentiment has been hit after the Troika and the Cypriot government came to an agreement over the weekend. The bailout package worth €10,000 billion certainly has not come for free, with a threatened levy both domestic and foreign deposits in the local banking system, applying 6.75% levy on deposits below the 100K threshold and 9.9% above it. Although increasing pressure has building up on this fact, figures would not be conclusive, as a parliamentary vote will have the final word any time soon. In the meantime, panic and jitters are growing bigger, as the specter of a domestic bank run and capital flight are hovering over the markets.
… Euro trading lower, 1.30 is now resistance
As a direct consequence, the EUR/USD opened markedly lower, dipping beyond 1.2900 although it has managed to gather traction recently, firstly regaining 1.2900 and then climbing further up to the current levels around 1.2950. Bourses in Euroland just followed suit, trading in the red territory with market participants watching closely the borrowing costs in Italian and Spanish debt markets, considered to be in the limelight today. Although a contagion to permeable sovereigns is practically ruled out, we can’t label the Cypriot event as meaningless, as it is posed to be a relevant driver in the week ahead.
News from Cyprus adds to the cocktail of uncertainty already stirring post-Italian elections woes with lackluster EMU fundamentals. In light of the upcoming preliminary manufacturing PMI prints in the euro area, traders are right to be pessimistic about the shared currency as those represent another potential source of euro weakness.
In the technical space, the pair is navigating within the down-channel set from 2013 highs and testing the 200-day moving average at 1.2964
The initial support now sits around the area of 1.2880/85, where converge the 50% Fibonacci retracement of the July 2012 – February 2013 upside and December lows, en route to 1.2680/1.2700 (November 2012 lows, 61.8% level and bottom of the channel).
Reinforcing the bearish sentiment, the daily RSI is hovering over the 40.0 level, allowing further decline in the upcoming periods.
… Euro trading lower, 1.30 is now resistance
As a direct consequence, the EUR/USD opened markedly lower, dipping beyond 1.2900 although it has managed to gather traction recently, firstly regaining 1.2900 and then climbing further up to the current levels around 1.2950. Bourses in Euroland just followed suit, trading in the red territory with market participants watching closely the borrowing costs in Italian and Spanish debt markets, considered to be in the limelight today. Although a contagion to permeable sovereigns is practically ruled out, we can’t label the Cypriot event as meaningless, as it is posed to be a relevant driver in the week ahead.
News from Cyprus adds to the cocktail of uncertainty already stirring post-Italian elections woes with lackluster EMU fundamentals. In light of the upcoming preliminary manufacturing PMI prints in the euro area, traders are right to be pessimistic about the shared currency as those represent another potential source of euro weakness.
In the technical space, the pair is navigating within the down-channel set from 2013 highs and testing the 200-day moving average at 1.2964
The initial support now sits around the area of 1.2880/85, where converge the 50% Fibonacci retracement of the July 2012 – February 2013 upside and December lows, en route to 1.2680/1.2700 (November 2012 lows, 61.8% level and bottom of the channel).
Reinforcing the bearish sentiment, the daily RSI is hovering over the 40.0 level, allowing further decline in the upcoming periods.