Technical Bias: Slightly Bearish
- EURUSD falls further below 1.08, consolidates at 1.0729 in European session.
- Greece required to submit a list of reforms to creditors by Friday to secure its next bailout tranche.
- Varoufakis warns of a deepening Eurozone crisis should Greece exit the currency union.
The EURUSD declined sharply on Monday, falling further below 1.08 as concerns about a possible Greek default weighed on investors ahead of Friday’s Eurogroup meeting.
The EURUSD retreated to 1.0725 in the Asian session, down from 1.0813. It would subsequently consolidate at 1.0729 in Europe, declining 0.78 percent. The EURUSD faces immediate resistance at 1.0849, Friday’s high. To the downside, initial support is located at 1.073, Friday’s low. A break below that level could see the pair extend its losses below 1.07.
Friday’s high reflected the pair’s five-month resistance line, signaling that the EURUSD is capped below that key level and could prepare for a retest of the low-1.05 region. A fall below that level would bring the prospect of parity back into play. The 1-hour chart shows downward momentum on the MACD and RSI, although the latter is approaching oversold levels.
Greece Default In-Focus
Concerns about a possible Greek default resurfaced over the weekend as policymakers coalesced in Washington for the International Monetary Fund Spring Meetings. European Central Bank President Mario Draghi said a deal between Greece and its creditors was needed urgently to avoid escalating the crisis that could force Athens out of the 19-member Eurozone. The Greek government is required to submit a detailed list of financial reforms to its creditors on Friday, the date Eurozone finance ministers descend on Brussels for the next round of Eurogroup meetings.
The list of reforms is necessary to unlock Athens’ next bailout tranche, valued at around $8 billion. A failure to please its international creditors could leave government unable to meet its short-term obligations, putting Athens on a path to default. This has raised fears about a contagion effect, which could undermine the Eurozone should it lose one of its member-states.
Greek Finance Minister Yanis Varoufakis highlighted what could happen if Greece were forced out of the Eurozone.
“Anyone who toys with the idea of cutting off bits of the Eurozone hoping the rest will survive is playing with fire,” he told a Spanish TV channel ten days ago, according to Reuters.
“Once the idea enters peoples’ minds that monetary union is not forever, speculation begins,” he warned.
Varoufakis is a prominent member of the far-left Syriza party, which swept to power in January on the platform of “anti-austerity.” Since assuming office Syriza has been locked in bitter negotiations with the Eurozone about reforming Athens’ €240 billion bailout program. While the Eurozone has already agreed to extend the bailout program, it will not do so until Greece takes decisive measures to speed up its financial reforms.