The euro was trading at $1.2564 as of 10.45am (London time), down 0.17% on the back of the ongoing Greek crisis.
At the EU summit yesterday, contingency plans for Greece leaving the euro were discussed. To add to the currency’s woes, market data released today offered no reprieve. Eurozone data showed manufacturing in May declined to 45 from 45.9 in April, although the expectation had been for a tiny increase to 46.
German PMI data fell sharply to 45 in May from 46.2 in April, prompting a sharp fall for EUR/USD. The index had been expected to rise to 47.
The German IFO business climate index also dropped, to 106.9 for May from 109.9 in April, with both the current assessment and the forward-looking components dropping sharply. Analysts had expected the index to come in at 109.4.
Yesterday’s EU summit held in Brussels led to no resolution or reprieve for the common currency, and only succeeded in creating an ideological rift between France and Germany. German Chancellor Angela Merkel said after the meeting ‘We want Greece to remain in the euro area. We expect that they will stick to the commitments that they have entered into.’ This intransigence does not bode well for the weeks ahead.
The euro sank below $1.2517 against the dollar, its lowest level since July 2010, and the downtrend seems to have started. According to the 14-day RSI the common currency is now firmly in oversold territory, with a reading of 26.
EUR/USD should continue to trend lower as long as there is uncertainty about Greece. There's little long-term support above the $1.2360 level, and if the currency pair breaches that it could end up trending all the way to $1.20, a level not seen since June 2010.