Major European currencies turn lower but with limited momentum

Price action during the first 24 hours of the week was limited as traders had little fresh news to trade on and the economic calendar was equally barren. The main theme in the currency markets is the exhaustion of the Dollar sell-off that we witnessed last week and the attempt to reverse that price action into gains for the US currency. However for that to take place a new catalyst is needed to spur new volatility in favour of the Dollar.

From a fundamental point of view, most headlines have to do with the risk that Greece’s difficulty to repay their creditors poses to the stability of the Euro area. It is clear that most nations and institutions have far less risk exposure to Greece to what they used to have but nevertheless a possible Grexit would be a bad precedent for the European Union. At the same time, over in the UK the possible outcome of the upcoming elections is this undecided adding to the uncertainty surrounding the region.

Taking a looking at the technical outlook of the major currencies, the Euro traded off its last week’s highs and is now in close proximity of the 1.0700 level. The sentiment is slowly turning lower and we believe that a clear break of the 1.0700 support floor could accelerate losses towards the 1.0600 lows’ area. The German ZEW Survey is scheduled for release this morning and analysts expect an improvement in the business sentiment metric however we doubt it would provide meaningful support to the Single currency.

The Cable lost the important 1.4900 support level during yesterday’s price action but failed to move far lower than that during the rest of the day. The UK currency is trading just below the support barrier this morning and if momentum picks up then we should be looking towards the 1.4800 level as the next area of interest. We have no scheduled reports for the Cable today so any price action will mostly be dictated by Euro’s flows.

Finally taking a look at the FTSE 100, the London index clawed back a significant part of its Friday losses and traded back to the 7,050 points’ area. It seems that the most likely scenario for the FTSE at this time has to be a consolidation between the 7,000 points support floor and the 7,100 points resistance barrier.