Forex Europe Review – Euro stabilizes but Greek debt fears remain

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The Euro bounced off its seven month low against the U.S. dollar to retrace in the European session to 1.3673 from 1.3536, lifted by bargain hunting. However, the single currency is expected to fall again as it had declined steeply on Friday on heightened investor fears that Greece is at risk of defaulting. Resignation of top ECB policy maker Juergen Stark highlighted division amongst the board members on how to tackle the debt crisis. French banks shares tumbled today on speculation of a downgrade by Moody’s ratings agency this week because of their Greek holdings. Meanwhile the focus is now on ECB President Jean Claude Trichet who is speaking at a press conference today in Switzerland.

 

GBPUSD took direction from EURUSD due to lack of domestic data and steadily climbed throughout the European session moving off the two month low reached earlier in the day at 1.5789 and hitting a session high of 1.5882. Meanwhile, EURGBP bounced of its lowest level since February 2011 to climb to 0.8612 from 0.8550.

 

The Swiss franc has remained steady against the euro since the Swiss National Bank intervention on September 6 when it introduced a ceiling of CHF1.20 against the euro. Since then EURCHF pair has traded in a very tight range above 1.20 but the single currency has been unable to rise much further due to the Greek debt concerns weighing the currency. Meanwhile the U.S. dollar which surged to a four month high of 0.8877against the franc in the earlier Asian session, was due for correction and profit taking, bringing USDCHF down to 0.8810.

 

EURJPY bounced off its ten year low reached in the previous session to climb to 105.46 in the European session from 103.88. USDJPY retraced as well from 76.74 to 77.14. Speculation is such that after taking the opportunity for profits today, a renewed sell of the euro is expected again as euro zone debt woes are mounting and investors will take refuge in the safe haven Japanese yen, as its alternative have, the Swiss franc is now out of bounds after the SNB intervention.