Euro slumps against the dollar on Greek fears; EUR/USD under selling pressure

The shared currency declined sharply against it G10 counterparts during the morning European session on Tuesday as Greek officials haven’t reached a deal with its creditors yet. Greek concerns are increasing ahead of repayment deadlines that approaching and raising the probability of a default. However German Chancellor Angela Merkel and French President Francois Hollande gave Greece 12 days in order to reach a deal on its rescue package. Greek Prime Minister Alexis Tsipras is continuing to stick to his red lines even as the country is quickly running out of money. The euro also tumbled on the signals that ECB may speed up its bond-buying program in the next couple of months.

Moreover, the Eurozone’s CPI was released yesterday, showing that the year-over-year prices remained stable in April as expected while the month-over-month Inflation rate decreased sharply to 0.2% from 1.1%. The ZEW Survey showed that the Economic sentiment for May in the Eurozone decreased more than the market forecast at 61.2 vs 64.8 prior. In Germany, the results of ZEW Survey were also disappointing, as both the Current Situation and the Economic Sentiment declined more than anticipated. The Current Situation came out 65.7 in May versus 68.0 expected from 70.2 before. The Economic Sentiment fell to 65.7 below projections of 68.0.

EUR/USD fell sharply after several unsuccessful attempts to break the strong resistance level at 1.1450. As a result the pair plunged below some significant obstacles including the psychological level of 1.1400 as well as the 1.1300 barrier, which includes the 50-period SMA on the 4-hour chart. However, the 4-hour charts show that the pair has been in a clear uptrend since mid-April. The short-term ascending trend line as well as the 200-period SMA, both are ready to provide a significant support to the price action in case of a further fall around the 1.1000 – 1.1040 zone.

On the upside, the euro could find resistance in the area around 1.1290 – 1.1300, which includes the 50-period SMA. The MACD lies below both its trigger and zero lines, while the Stochastic seems ready to cross below its 20 level, thus I would expect a further consolidation or a downward corrective wave before the bulls prevail again. All in all, the 4-hour chart certainly suggests we are due some dollar strength.