The European currency declined against most of its counterparts after a worse than estimated Unemployment change in Germany. The pair hit a new low of two months after a change in the number of unemployed people during the previous month in Germany released at 13K while economists expected -2K. This is the highest number of unemployed people for the current month since October 2012. Two hours after the open in London, Forex on EUR/GBP were available around 0.8416 and a further decline for the day is expected by analysts.
The euro also came under pressure after a debt auction in Italy saw borrowing costs climb to five-month highs as investors are concerned over political uncertainty in the country. The leader of the first party elections Pier Luigi Bersani wasn’t able to form a new government after talks with rival party leaders ended with rejection from Beppe Grillo.
Market participants are also nervous as Cyprus is due to reopen its banks for the first time in nearly two weeks. The government on the island country has placed control measures to prevent a bank run. People in the country will able to withdraw just 300 euros per day or 3000 euro for people that are going abroad. Lawmakers in Cyprus are concerned that people will withdraw all their money from banks as a rescue plan imposes heavy losses on depositors with over 100 000 euro in their accounts. Cyprus and international leaders reached the bailout deal on Monday several hours before European Central Bank was planning to cut all financial transactions for the country. The second largest bank is set to be wound down and all its depositors with over 100 000 euros will support the rescue plan. Investors and forex trades are worried that a similar plan will be used in the future for other countries in euro zone that have problems with banking system.
Technically speaking, bias is the currency pair remains on downside and cross seems to find its next support level around 0.8360. A price movement below this level would extend the negative trend to 0.8320. On the upside, a break of 0.8580 resistances level is needed to confirm completion of fall from 0.8793. Below it the trend will stay mildly bearish. In case of a break above the highest level this year at 0.8815, a medium term bullish trend will be resumed for attack of the psychological point at 0.90.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.