Across the board, major currencies are lower against the US dollar following a break down in Fiscal Cliff negotiations between US Democrats and Republicans. The lone gainer, however, seems to be the Euro. The single currency is getting a lift from a German vote ratifying the revised Greek deal. But, the event may not matter at all soon as the single currency approaches a key resistance that could turn the tide.
With a majority vote, the German Bundestag approved the newly revised Greek bailout deal, which will allow the Greek government to work towards a debt to GDP ratio of 120% by the year 2020. The approval was supported by an overwhelming 81% of the vote, with only about 100 votes opposing the inevitable outcome. The latest aid package was fully endorsed by German Finance Minister Wolfgang Schaeuble, who stated that a failure to approve the measure would plunge the region in to a situation where “the entire euro area could break apart”.
Positive for the euro, the approval was widely expected by the market as policymakers are seemingly now more fearful of a Greek default, and subsequent breakup of the European Union, than before.
The bullish news helped the single currency to gain against the US dollar in the session, finding intraday support at 1.2967. Incidentally, the major pair is now trading above the 1.3000 psychological figure.
However, the current bullish momentum may be questionable going into the weekend and next week as a major resistance figure jeopardizes the current run. In particular, major resistance at 1.3050/1.3100 is seen as prompting a decline in the near term. The barrier is being reinforced by a 1.3484-1.3119 descending trendline, as technical oscillators are now indicating overbought signals. Any failure at this major barrier would prompt a decline to initial support at the October 1st, 1.2803 low.
Source: FXTrek Intellicharts