A few things over the weekend continue to pressure the euro.
1) Eurozone central bankers are starting to discuss how to manage a Greek exit, though the likes of Jen Weidmann, Bundesbank prez and Mario Draghi, ECB prez are adamantly against it.
Evangelos Venizelos - PanHellenic Socialist Movement (Pasok)
Antonis Samaras - New Democracy Party (Centre-Right)
Alexis Tsipras - Syriza
Talks are not going anywhere to form a coalition.
3) German State election in North-Rhine Westphalia (most populus region), reflect unpopularity of Merkel and CDU, Chancellor Angela Merkel's party. It took in 26.3 percent, falling 8.3 percent since 2010. This is the party's worst result in the state since World War II. I wonder if this is causing officials to brace themselves for possible Greek exit because Merkel needs all the support she can get to stick to the austerity plans.
French socialist president Francoise Hollande will meet with Merkel on Tuesday during the Brussels meeting. How they discuss the topic of austerity will be monitored closely.
4) Spanish 10-yr bond yield is above 6.00%. (There is an auction for these bonds on Thursday).
5) Stocks in Europe slide as well as equities worldwide sliding - risk aversion.
EUR/USD Daily chart 5/14/2012 7:18AM EDT
These all pressure the EUR and it did fall below 1.29 with a low of 1.2855 as we head into the US trading session. But with all these euro-negative themes and headlines, the EUR/USD is not showing a panicky market. Looking at the daily chart, we see that the next key support is the 1.2625-1.2670 area. The RSI is kissing 30, showing there is bearish momentum, but in the short-term we might be developing oversold conditions.
The outlook continues to be bearish. The Brussels meeting can provide some momentum to the downside, or help the market work in a correction. Last time the market faced this type of situation, EU leaders worked out LTRO and gave some confidence to the EUR. Now there is a feeling the market is still holding on some hope. Let's see if Tuesday's meeting in Brussel will shatter or fill this hope.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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