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The September Euro is trading unchanged overnight following Thursday’s late session rally off its low. The Euro posted a solid rally overnight to 1.4273 only to be met with fresh selling pressure. The overnight range is trading inside of yesterday’s session, indicating investor indecision.
On Thursday the U.S. Dollar mounted a strong rally in a delayed reaction to the Fed‘s decision to end its QE2 stimulus plan and to refrain from providing any additional stimulus over the next few months.
The Euro rallied sharply higher overnight after the Ifo index of German business confidence unexpectedly rose. This rally was promptly sold as fear continued to spread regarding Greece‘s ability to meet is financial austerity obligations. European Union leaders continue to urge Greece to pass the package of budget cuts or face default.
After giving Prime Minister George Papandreou a vote of confidence earlier in the week, Greece’s parliament must now approve the package of austerity measures currently on the table. A failure to do so will mean the European Union is likely to remove all bailout packages it is currently proposing. This is a condition that must be met in order to secure the EU bailout money and be considered for further aid packages.
Euro traders are nervous this morning because without the bailout money, Greece would be pushed to the brink of default.
European finance ministers will meet on July 3 to decide whether Greece qualifies for its next aid payment provided it meets the austerity conditions. Volatility could be high between now and then as uncertainty will rule the markets.
Technically, the Euro is in an uptrend according to the daily swing chart. This trend will remain intact as long as the bottom at 1.4073 holds. A break through this area will turn the main trend down, but a failure to hold the psychological support at 1.4000 could lead to an acceleration to the downside.
With the short-term range 1.4073 to 1.4441, the retracement zone at 1.4257 to 1.4214 could become important support. This zone is being tested this morning. The short-term direction of the Euro is likely to be determined by how the single-currency reacts inside of this area. Holding this zone will be bullish, but a failure will indicate further downside pressure.
