EUR/USD Slides As Greece Warns of Default

05/02/2015 9:00 am EST

Focus: FOREX


The staff at FXTimes.com points out that Wednesday marked the third consecutive decline for this currency pair, largely stemming from a broad reversal for US dollar pairs. The staff also shares their outlook moving forward in light of Greece’s new warning of default.

Technical Bias: Slightly Bearish

Highlights:

  • EUR-USD declines for a third day, falling to low -1.11.
  • US dollar index strengthens ahead of April FOMC minutes.
  • Greece warns it could miss a June 5 loan repayment to the IMF without new bailout agreement.

The EUR-USD declined for a third consecutive day on Wednesday after the Greek government warned it would miss a critical payment to the International Monetary Fund on June 5 without a new bailout agreement.

The EUR-USD continued to retreat from last Friday’s three-month high of 1.1490. The pair declined 0.2% to 1.1122, recovering from a daily low of 1.1062. The EUR-USD faces initial support at the daily low and resistance at 1.1279.

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Wednesday marked the third consecutive decline for the EUR-USD, largely stemming from a broad reversal for US dollar pairs. The dollar index, a trade-weighted average of the dollar against six competitor currencies, is up 2% since Monday. The index edged up 0.2% to 95.43 in Wednesday’s morning session ahead of the April Federal Open Market Committee meeting minutes.

Greece Warns of Default

A Greek spokesman described the June 5 payment deadline to the International Monetary Fund as the “moment of truth,” placing more pressure on the troika to extend an agreement that would keep Athens funded and part of the EuroZone. While it is generally understood that Greece has until the end of June to reach an agreement, a leaked document from the IMF over the weekend said June 5 was the more tangible deadline. Without an agreement, it is unlikely that Greece has enough cash to make the June 5 payment and the several others that follow it.
Greece is on the hook for more than €1.6 billion in loan and interest payments next month, including an €85.4 million interest payment to the European Central Bank.

Juncker Denies New Bailout Plan Is in “Final Stages”

European Commission president Jean-Claude Juncker denied that a new bailout agreement was in its “final stages,” contradicting a leaked document in Greek media earlier this week. Juncker said on Wednesday that a deal between Europe and Greece over a new rescue plan would not be reached at the end of this week’s summit in Riga.

On Tuesday, Greek finance minister Yanis Varoufakis said that a final agreement would be reached very soon and that “substantial progress” has been made. Those comments for echoed by Greek labor minister Panos Skourletis, who said that a new deal would be reached “in the coming days,” citing June 5 as the real deadline.

By the Staff of FXTimes.com

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