Technical Bias: Slightly Bearish
- EURUSD eases off 2-month highs, slips toward 1.11 handle.
- Greece intends to meet loan obligations, but IMF taking a hardline approach on economic reforms.
- Sentix investor confidence index declined to 19.6 in May from 20.0 in April.
The EURUSD was quick to reverse its two-month highs on Monday, as growing discord between Greece and its Eurozone partners weighed on the euro.
The EURUSD was down 0.6 percent to 1.131 in the European session, not far from the session low of 1.125. Immediate support for the EURUSD is located at the 1.100 psychological level. A drop below that threshold would lead to 1.1072, the low from April 30. On the upside, initial resistance is likely found at 1.1223, the daily high.
Greece-EU Talks Break Down
Greece failed to reach an accord with its European Union members over the weekend, putting the cash-strapped Greek government dangerously close to a default. Lawmakers had hoped to strike a tentative deal by Sunday, leading enough time for final approval at the May 11 Eurogroup meetings.
Greece maintains that it will meet its debt obligations, according to labor minister Panos Skourletis.
“The country has chosen to pay its obligations and reach an agreement. We are trying to have the money,” he told Mega TV on Monday.
However, the International Monetary Fund is unlikely to unlock remaining bailout assistance unless Athens agrees to implement tough economic reforms, which have been described by the media as “red lines” for Greek negotiators. Among those reforms are broad pension cuts and mass layoffs that may put the far-left Syriza party at odds with its voter base.
Eurozone investor confidence eased slightly in May, but remained close to its seven-and-a-half year high. The Sentix investor confidence index fell to 19.6 in May from a reading of 20.0 in April. Analysts forecast the index to decline to 19.8 this month. A level above 0.0 indicates optimism, whereas a reading below that level denotes pessimism.
Meanwhile, Eurozone manufacturing conditions improved in April, Markit Group confirmed on Monday in its final PMI estimate. Eurozone manufacturing PMI was at 52.0 in April, down slightly from 52.2 in March.
Greece’s manufacturing sector slipped further into contraction last month with a PMI reading of 46.5. That was the lowest in 22 months.