EUR/USD Rate Falls Towards 1.09
The euro to dollar exchange rate has fallen in dramatic fashion on Tuesday the 7th July.
The euro dollar rate is seen at 1.0920, down a dramatic 1.22 on a day-to-day basis.
This is the lowest level seen in the exchange rate since the No vote to Greek referendum was announced. However, the pair held these levels momentarily as the euro bounced back.
The Euro has lost more than 4% against the safe haven US dollar over the past 13 trading days.
Following Sunday’s referendum result and with no new bailout deal in sight, the ECB has said it is now more difficult to lend more emergency money to Greek banks through its ELA program.
We have been warning that the next bout of trouble for the euro would come via the ECB.
“Emergency Liquidity Assistance (ELA) is considered ‘life-or-death type’ loans for banks. Currently the Greek banking system is alive, but barely breathing,” says a newsflash to clients from Western Union Business Solutions.
Reports suggest they have ‘just days left’.
“Risk aversion has pushed EUR/USD sharply lower and with US dollar strength increasing, GBP/USD is now in danger of further losses. Since mid-June GBP/USD has lost over 400 points (4 cents),” say Western Union.
After the decline to EUR/USD 1.0970 at the market open following the victory of the “No” front in Greece, the euro recovered, and stabilised yesterday in the EUR/USD 1.10 area.
“The reaction was similar to last Monday’s, but as we pointed out yesterday, in the next few days downside pressures could be stronger, as the situation in Greece is more “serious” than it was a week ago,” says Asmara Jamaleh at Intessa Sanpaolo.
The ECB has kept ELA at Friday’s levels, while raising guarantee margins. Merkel and Holland have invited Greece to present “serious proposals” as soon as possible, but the German government is very cautious.
Today Tsipras will present the new proposals: the Eurogroup meeting is scheduled at 1:00pm, and will be followed at 6:00pm by the Euro Summit. Therefore, this will be a rather intense session, with significant intra-day volatility, in which downside risks will prevail on the single currency.
“Key supports are located at EUR/USD 1.0955 and 1.0900. However, the downside margin would extend as far as into the in 1.08 area if today’s meetings fail,” says Jamaleh.
