The EUR/USD pair fell during the session on Tuesday, as the bearishness from the late Monday trading continued. Exaggerating this was the fact that the Cypriot Parliament voted against the so-called “deposit tax” that the troika demanded in order to offer the bailout.
As a result, the markets got nervous during the session, and sold off anything Euro related. With that being the case, we have broken significant barriers to the downside and believe that this market continues to go much lower. However, there is quite a bit of support around the 1.2850 level, and we will need another catalyst to send this market lower.
Obviously, the 1.30 area begins a significant swath of resistance that this market will have a lot of trouble breaking over. However, if we get good news out of Cyprus that could possibly be the catalyst for that move. Nonetheless, any victory in Cyprus will be celebrated for the short term only, as then we would have to turn our attention around and start paying attention to what’s going on in Italy again.
With that being said, the Italians still have not formed a coalition government, and it is very likely that we will have to have another round of elections in that country. With that being the case, a lot of people will be nervous, and we will not know the direction of the newest government until those results are in. Because of this, there will be concerns that austerity may not be applied, or debts not repay. After all, a lot of the politicians that were elected last time were anti-austerity candidates.
Looking forward, there is a significant amount of resistance above the 1.30 as well. It isn’t until you clear the 1.32 level that you begin to really tear away at the massive selling that we have seen. However, if we managed to break down below the 1.2850 level, we really could accelerate to the downside. Needless to say, the next couple of sessions will be very interesting as we could dictate the next major move in this pair.
Written by FX Empire