Euro Pulls Back As Optimism Over Greece Fades

Includes: FXE, UDN, UUP
by: FXstreet

The euro lost ground versus the greenback on Tuesday despite eurozone leaders reached an agreement on Greek financial situation late Monday. Even though the knee-jerk reaction led EUR/USD to above 1.3000, the euphoria was short-lived and some analysts are blaming a buy the rumor sell the fact behavior.

Risk aversion ruled during the New York session as the market focused again on the potential fallout of the delicate fiscal negotiations in the U.S. The USD rallied and stocks fell, despite upbeat U.S. consumer confidence and durable goods orders data.

Euro fails to consolidate above 1.3000

EUR/USD reached a high of 1.3008 after news that eurozone finance ministers agreed to release further funding for Greece in December. However, the pair quickly lost momentum and turned negative, having fallen to a low of 1.2914 before the 100-hour SMA contained the slide.

"The decline in the euro and other major currencies likely reflects selling on the fact, with an agreement long expected and the eurozone economic outlook still underwhelming", says Nick Bennenbroek, Head of Currency Strategy, Wells Fargo Bank.

With today's pullback, short-term picture has turned bearish although daily charts hold a positive bias. The 1.2900 area holding as support is crucial to retain focus on the upside.

According to the TD Securities team, the fleeting optimism from an agreement on Greek funding is understandable since it looks like they'll be back to the negotiating table in the not too distant future. "That seems to have set a short term top for the EUR just above 1.30, but we will need a see a stronger sell-off before late-November bull run is called into question," they say.

"If we manage to get below the 1.2880/1.2900 zone, that would be a better signal of more downside ahead. Until then, this move looks to be more consolidative than anything", TD Securities explain. "That could leave the EUR as a bit of a range trade for now, however, we do still recognize that the medium/long-term technicals are still leaning more positively".

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