Global forex markets are once again turning their attention to the sovereign debt issues in Europe, as the lack of progress towards any concrete agreement has now forced this issues back to the top of the agenda, as EU finance ministers meet once again this week, in an attempt to reach some sort of unified agreement. However, what was clear from last week’s price action, particularly in the euro dollar, was the fact that the forex markets are rapidly losing patience with the lack of progress and in particular with the inability of the EU states to agree on the size and shape of any support package in the event of any defaults.
Indeed in last week’s bond markets, Portuguese bonds reached their highest level with the ECB stepping in to the bond auction as a result, raising fresh concerns over Portugal’s ability for survive without being forced to request a bail out package. Spain of course continues to toil with a similar problem, and should either of these fail, then expect to see the euro sell off sharply as a result, particularly against the US dollar has shown some bullish sentiment in the last few days.
From a technical perspective of course, in the last three weeks on the euro dollar chart, we have seen two shooting star candles along with a doji candle, as the recent bullish trend appears to have finally run out of steam, despite continued political support from both France and the ECB. Should this week;s events unfold as expected, then the euro dollar could test the 1,3325 region in the early part of the week, with a potential move back to 1.3276 later in the week.