The presidential elections in France and the parliament elections in Greece results are still putting pressure on the single currency as they looked to the market like a referendum on the austerities measures like this which has been asked by the previous Greek PM George Papandreou which lead to his resignation last year after retreating back of doing it amid strong criticism from EU core funding countries of the Greek debt as it is obvious that the streets in the countries south of Europe which are suffering from debt crisis are against these measures.
These measures included cuts of the public sector wages and jobs and cuts of the governmental spending and in the same time increasing of the taxes to dampen the growth in the same time they cut the deficit of these debt ailing countries budgets.
But the situation is different surely from France to Greece as it is not allowed to this last one to say no these measures and there is no leeway to go through without the European strict following up specially after announcing the second bailing out plan of Greece which counted this expected change into its account in its structure.
While the case in France is another thing as it will be required from the wealthy people to pay much with this new social president who promised to make a change in the EU fiscal pact in the benefit of the current struggling EU growth and this stance has effected negatively on the French stocks market as Germany can not accept this change easily and this can cause a split between these 2 countries who are the main EU policies markers in the face of the crisis which can lead to cracks inside the Euro zone which is suffering strong downside growth risks and weak labor market as what has been highlighted recently from The ECB president who looked worried last week after the ECB decision to keep the interest rate unchanged about the labor market in EU which carries the negative impact of debt crisis and the negative impact of the governmental efforts for getting over it by cutting its spending and hiking the taxes with rising of March EU unemployment to 10.9% showing persisting difficulty facing this sector and this pushed him to call for restructure reforms and spending on the infrastructures for supporting demand in this market for adding more jobs.
The ECB is still looking for positive changes by its recent LTROs 2 rounds in the European economy as they have done in the banking sector inside the EU which has been saved by this program but its impact on the European economy is still looking lagged behind and the sack of confidence in the euro zone economy can move it forward to take more steps in stimulating this economy which is giving weak signs and this prospective is putting pressure on the single currency versus the greenback from another side as it is not looking crucial to be done by the Fed as it looks currently in the euro zone so, it looks now that the ECB is the closer one to these measures than the Fed.
The ECB has not given last week hinting of a new LTROs or an interest rate cut decision which has not been discussed in the last meeting of its member as what has been announced in the press conference after it showing appreciation of the current inflation upside risks which are resulted from the high energy, commodities prices and the imposed taxes while the downside risks are pushing down by the economic slowing down expecting the inflation to stance above the ECB 2% y/y target in 2012 before easing below it in the beginning of 2013 by God's will.
God willing after opening this week below its previous support at 1.3056 falling below its psychological level at 1.30 reaching 1.2953 in the beginning of the week, this pair can meet another supporting level at 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January while getting up again can face resistance at 1.30 63 whereas it has failed to recover further this week to fall again below 1.30 and in the case of breaking it, it can meet a higher resistance at 1.3180 and this can be followed by 1.3281 which its breaking can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top and in the case of breaking 1.3489 the pair can meet other resisting levels at 1.3546, 1.3613, 1.3808 before 1.387 which has not been broken since the end of last October and after several tries to break it in last November.
FX Market Strategist
Walid Salah El Din