Thursday, 14 Apr 2011

Talk of Greek Debt Restructuring Sparks Euro Selling

At lunchtime during the European trading session equities turned lower and the euro was sold across the board prior to the release of US inflationary data and unemployment claims.

After another failed attempt to move above the 1.4520 level, the EUR/USD sold off to a low of 1.4365 before trading back to 1.4375. The EUR/JPY was trading at 119.55 from 120.87 while the Swiss franc strengthened as the EUR/CHF fell to 1.2856 from 1.2949.

Equities were down with the FTSE 100 lower by -1.00% and the DAX sliding by -0.82%.

Sparking the selling were earlier comments by German Finance Minister Wolfgang Schaeuble who is expecting further analysis on the debt sustainability of Greece to carry its debt load. The potential for the restructuring of Greek debt could be in line if the report shows further declines.

Such comments in the past have spared euro selling. However, the market has largely ignored European troubles tied to Greece, Ireland, and Portugal, only to focus on yield differentials as the ECB raises interest rates. Today's selling may simply be a buying opportunity for traders following a bout of euro selling.

This afternoon markets are expecting weekly unemployment claims from the US as well as US PPI data. Both reports are due at 12:30 GMT. Lower unemployment claims and weak inflationary pressures should allow the EUR/USD to close ground from this morning's declines. EUR/USD support is found at the rising trend line off of the January low and 20-day moving average at 1.4245. EUR/USD resistance comes in today at 1.4520 with an initial target of 1.4580.