News of Greece Deal Weakens EUR/USD

1. The EUR/USD traded lower after briefly testing the psychological 1.3000 level. News of a deal to provide financial aid for Greece sent the single-currency higher, but after last week’s sharp rise, it appears to be a buy the rumor, sell the fact situation. 

With the Greece situation taken care of, traders will now shift their focus on Spain and its need for fresh financial aid. This weekend’s elections led to victories by pro-independence parties, leading some to believe that the formal request by Spain for financial aid will become more complicated. 

Getting back to Greece, the new deal struck between the European financial officials and the Greek government calls for an extension in time for principal payments and a postponement of interest payments. It appears that an actual solution wasn’t reached and that the issue was “kicked” down the line although as details of the deal are revealed, it may show that Europe has decided to “bite the bullet” and share some wealth with Greece rather than just lending it more money. The decision doesn’t seem to be sitting too well with traders today, but the Euro may improve later in the week once traders get a grasp of the new proposal. 

Gains in the U.S. Dollar are also exerting pressure on the Euro as well as the British Pound. The dollar gained after a U.S.economic report was better than expected. Orders for U.S. durable goods were flat in October, economists had predicted a decline. Improvements in U.S. home prices also helped support the greenback. 

The GBP/USD finished its latest session lower in conjunction with the weaker Euro. Sterling traders are worried that a recession in Europe will keep pressure on the U.K. economy. Additionally, some traders believe that the Bank of England will revive its asset-buyback program if economic reports continue to point toward a fourth quarter recession. 

Weaker equity markets and a stronger dollar pressured December gold prices today. Once again the clash continues between those who believe gold is an investment and those who want to treat it as a reserve currency. Technically, the market is straddling a key Fibonacci level at $1750.00. A failure to hold above this level could encourage profit-taking and fresh shorting, making a move to $1735.00 over the near-term likely. 

January crude oil continued to trade flat-to-lower as the lack of clarity holds prices in check. A broad range has been defined as $84.00 to $89.00 with a mid-point at $87.10. Today’s close was above the mid-point, giving the market a slight bias to the upside, but strong buyers have been absent. Traders appear to be getting mixed fundamental signals. Although inventory levels remain high, there is an optimistic view building that the worst is over and that an improving economy will drive up demand.