Forex: Two main Cyprus themes weighing on the Euro

FXstreet.com (Barcelona) - The Euro has fallen without mercy from last week's 1.3106 high to now threaten 1.29; what is even worse for the interest of buyers, it faces the prospects of triggering reported stops below 1.2870/80.

For now though, the 1.29, while marginally breached, still sees buying interest.

To put things into perspective, some may wonder why a country the size of Cyprus is able to cause such a drop in the Euro, one that overstretches in magnitude any recent sell-off seen, even the slide post the unresolved Italian-elections.

Despite the perceived Euro value has been taken like a rubber band to an extreme where interest to become a Euro buyer at short term low wholesale prices may arise, there seems to be two main themes still holding players back from participating into the market.

Firstly, there is huge uncertainty over how much this will impact confidence around other peripheral countries, as the prospect of a first bold robbery from hard-earned small saver's bank deposits sets a dangerous precedent.

Secondly, the fact that up until now, reports coming in suggest the bank tax levy is still far from certain, with the parliamentary voting scheduled this Monday.

As a matter of fact, is worth remembering that Cyprus ruling government does not enjoy a majority in the chamber, meaning that rejection to ratify the unpopular act of theft may lead to large banks in the country collapsing.

If Cyprus is able to renegotiate the bank deposit tax to only target uninsured deposits above €100,000 or even if it doens't, the levy is approved without significant drame in confidence around other peripheral Eurozone countries, which would suggest no immediate risk of outflows from Spain, Italy, Portugal, etc., the Euro may start to see saavy Euro buyers re-emerge.

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