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Forex - EUR/USD plunges as Greek euro zone exit weighed

Published 05/14/2012, 12:35 PM
Updated 05/14/2012, 12:37 PM
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Investing.com - The euro traded sharply lower against the greenback Monday, striking a four-month low as worries regarding Greece leaving the euro zone rocked confidence in the single currency.

EUR/USD hit a low of 1.2826 during U.S. trade, the pair’s lowest since January 18; the pair subsequently consolidated at 1.2848, falling 0.53%.

The pair was likely to find support at 1.2733, the low of January 18 and resistance at 1.2903, the session high.

Speculation regarding the possibility of a Greek exit from the euro zone intensified, as talks aimed at forming a coalition government remained stalemated.

The deadlock energized fears that a fresh round of elections is becoming inevitable and brought worries to the surface over the country’s ability to uphold its fiscal commitments.

Meanwhile, concerns over the health of Spain’s banking system remained, pushing the yield on Spanish 10-year bonds to 6.27%, the highest level since December, after an auction of government bonds earlier saw the country’s short-term borrowing costs rise.

Adding to the bearish sentiment, official data indicated that industrial production in the euro zone unexpectedly declined 0.3% in March, against expectations for a 0.4% increase, fuelling fears over the health of the region’s economy.

The euro dropped to a three-and-a-half year low against the pound, with EUR/GBP giving back 0.72% to hit 0.7980 and hit a three-month low against the yen, with EUR/JPY dropping 0.92% to hit 102.30.

In other news Monday, European Union finance ministers were set to hold talks in Brussels, while Greece’s president was due to hold last-ditch cross party talks in an attempt to avert fresh elections.



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