EUR Stays Around The 1.25 Psychological Level, Waits For Greek Election

The single currency is still trading around 1.25 psychological level waiting for the results of Greece's parliamentary election next weekend.

The single currency could open the week over 1.26 after the Spanish request for the European bailout plan by its economic minister but quickly it got back below 1.25 level on the market worries about the current Spanish debt solvency. No more details about the EUR 100b bailout to rescue the Spanish banking sector have been released. Its effectiveness is a new question in the market driving the Spanish CDs up further putting weights again on the single currency.

While it is still not obvious whether or not the Fed is close to a decision on stimulating the US economy with more QE after the recent weak released data of the US labor market, the ECB is still looking closely into a new stimulating decision for reviving the EU stagnant economy in the face of the current weak confidence in the EU amid the debt crisis negative impact on the governmental ability to underpin the economy and fighting its deficit in the same time.

Unemployment in the eurozone is still creeping up reaching 11% in March. That's beside May EU manufacturing PMI coming at 45.1 from 45.9 in April and yesterday's release of May EU services PMI which came at 46.7 from 46.9 in April. The retails sales in EU of April which dropped by 1% monthly and they were expected to come down by just 0.1% after rising by 0.3% in March. Even in Germany, we have seen recently that IFO business climate of May has come significantly down to 106.9 from 109.9 in April and it was expected to ease back to 109.6 only showing massive falling of the investors' confidence with the current negative impacts of the debt crisis and the global economic slowdown. At the same time we see EU CPI easing down yearly in April to 2.6% from 2.7% in March giving bigger space to the ECB to each its monetary policy with fewer worries about the inflation upside risks which are dampened by the weak demand.

The ECB's president Mario Draghi has announced after the decision of keeping the interest rate unchanged at 1% last week that this decision was not unanimous and there was voting direction towards more cuts but this direction strength was not enough last meeting. He has claimed also that the ECB has lowered its growth forecasts and inflation this year inside the eurozone making a belief in that a decision of cutting the interest rate again can be a matter of time with the persisting of the dovish economic performance and the sack of liquidity for reviving it.

But in the same time, his talks about the recent unstandard 2 LTROs round were showing that the ECB is still looking for further positive effects of them on the economy after they could actually rescue the banking sector in EU by giving loans passed a trillion of Euros for 3 years with just 1% yearly interest rate with easy collateral rules specially in the second round by the end of last February.

The single currency can now meet resisting level at 1.2665 where it has failed to continue its rise up after white gap opened this week. In the case of crossing it there can be other levels of resistance at 1.2757, 1.2867, 1.3063, 1.3180. This can be followed by 1.3281 which if broken can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top. In the case of breaking 1.3489 while the way down can be met with supporting levels at 1.2433, 1.2408, 1.2357 before 1.2286 which could hold by the end of last week and the breaking of it can lead again to 1.2151 which its breaking can open the way for 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010 which drove the pair later to reach 1.4939 on 4th of May 2011 whereas the pair has managed to ease back again.