With Eurogroup finance ministers unable to come to an agreement on Greece, the EURUSD has remained in relative consolidation for the second day in a row. The range trade has kept hopes alive that the single currency could be privy to some upside potential very soon. But, even as policymakers are scheduled to reconvene on November 26th to decide the fate of Greece, there is ample opportunity for Euro bears to pounce.
By now everyone in the market knows that European leaders failed to reach an agreement on the $40 billion bailout disbursement to the Greek nation. What isn’t known is the fact that differences of opinion between European leaders and the IMF continue to hamper a resolution. Notably, IMF Managing Director Christine Lagarde remains steadfast in her belief that Greece should be able to cut its debt to GDP ratio to 120% by 2020. This is in stark contrast to a recent decision by Eurogroup Chairman Jean-Claude Juncker, who announced a two year extension earlier this week. Without Greece making the 2020 deadline, Eurogroup leaders run the risk of losing IMF support, as Lagarde has stated an extension would be unacceptable – and cause for withdrawal. Euro Bearish.
The Greek bailout drama has added to already rising risk of delays in current negotiations for a seven year budget deal among European leaders. As European officials are set to meet tomorrow, a growing divide has emerged over further austerity measures. On the one side, Germany and the UK areleading a charge for further fiscal cut backs of approximately $260 billion on an upcoming $1.3 trillion budget that is to last till 2020. On the other side are other nations already in compromising situations – which has become more complex since France lost its AAA credit rating about two days ago. Afurther failure to act as a cohesive government could jeopardize optimistic hopes that Greece will receive its much needed bailout funds soon.
Beware the Bear
Technical indicators aside, it seems that the psychological 1.3000 figure remains the key upside resistance barrier in the near term. The figure is being reinforced by the 1.3088 38.2% fib resistance and 1.4532-1.4199 descending trendline. Failure to penetrate the figure to the upside would jeopardize the current momentum, opening scope for a decline to 1.2500.
Source: FXTrek Intellicharts