Here’s an update of the EURUSD chart that I posted last May 21, 2010 (click here for my previous post). As you can see, the pair indeed met some resistance at the psychological 1.2600 marker which apparently was also the 50% Fibonacci retracement level of the most recent down-wave. After failing to rally above 1.2600, the pair has sunk and is now trading just above the support at 1.2200. With conditions far from being oversold, the pair has still a lot of room to move lower. In the event the fiber falls below last week’s low at 1.21445, it could head all the way down to 1.1800.
Aside from the reasons that I mentioned in one of my latest blogs about the euro, the now infamous anti-dollar has taken another hit today. The EUR slipped again vis-à-vis the greenback and the yen not only because of what is going on in the euro zone but also in the Far East. Tensions are mounting in the Korean peninsula for a possible ‘war’ when North Korea torpedoed a South Korean navy ship, killing 46, last March 26. Reports from South Korea confirmed today that it was indeed its neighbor that sunk the former’s vessel, prompting both sides’ military to be ready for possible combat. This new threat of course sparked some risk aversion from the market, leading the investors away from the ‘riskier’ assets like the euro back to the safe arms of the greenback and JPY.
On top of the North Korean affair, several commercial banks in Spain are also facing some financial difficulties when a bunch of their clients had defaulted. Those banks are now encouraged by Spain’s regulators to merge with some stronger cohorts after the International Monetary Fund (IMF) pushed the country to overhaul its financial system.
Presently, it appears that the EURUSD is bound to open even lower during the US session given today’s 2.3% slide in the S&P 500 futures.