Euro Hits Near 2-YR Low, Grexit Fears Persist

As much as every politician wants this to go away, it won’t as the euro got hammered yesterday in NY trading, dropping 120+ pips in about 3 hours as the EU summit didn’t really calm any fears of an eventual Grexit from the EZ. Of course EZ officials telling members of the currency bloc to prepare contingency plans for an exit are not helping. Oh yeah, did we forget to mention European banks have the highest loan-to-deposit ratio in the world (3x that of the US banks)?  How do you plug  €11Trillion euros in deposit? We don’t know, but don’t see it happening easily. Meanwhile the stalemate between Frau Merkel and France’s Hollandaise sauce about the eurobond program is only exacerbating the mass exodus out of euros.

Meanwhile, investors are fleeing any high yielding currencies like the AUD, NZD mostly piling into JPY and USD which have been across the board gainers this week.

NZD/USD –  Stubborn Little Buggar

While we want to avoid trading EUR/USD as the political winds are too volatile, along with a record number of shorts, we prefer buying JPY’s as a whole. But one pair is sticking out intra-day as being the most resistant as of late to the USD and that is the NZD. Although the pair did sell off against the greenback twice yesterday on an intra-day basis, it has rallied to recover all the losses and is now sitting at a critical role-reversal level (.7525). What we are noticing is how after the 24hrs of straight selling, the pair formed a bullish pin bar strategy off the .7460 level, immediately printed a bearish engulfing bar, only to print a piercing bar right after telling us buyers are down there willing to prop it up as the pair looks over-extended.

The current 4hr bar is showing another pin bar with a higher low suggesting the buyers came it at a worse price and higher level feeling confident enough intra-day to prop the pair up and work for higher ground. If the pair can clear the .7525 level, along with .7560, then we could see a return back to .7620 and .7670 so watch for intra-day price action clues for possible more upside play.

Any moves back to .7460 are also potential levels to watch for intra-day longs but a break here suggests downside play to .7369 before new buyers will consider stepping in.