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Tickers in this Article: UUP
Previously selling off from head-and-shoulders formation resistance at 1.4553, the EUR/USD currency pair had continued to fall in the waning New York hours of January 25, 2010, before finally finding hourly medium-term support at 1.4030. Upside potential for the currency pair remained relatively strong with price targets around the 1.4461 resistance line. Incidentally, the figure additionally serves as the neckline for the aforementioned head-and-shoulders formation. The advancing trend did, however, remain in jeopardy as a death cross seemed to be forming along with a bearish divergence in the MACD oscillator. Technically, both signals combined strongly suggested another leg lower before any further upside can take place.


Since that time, the pair has dipped over 100 pips on two separate days.

The Greece Situation
Fundamentally speaking, demand for the euro continues to remain weak as speculators mull over the escalating Greek situation. A bearish sentiment hovers over the country's debt rating, as credit default swaps or the cost of insuring the country's debt, has risen to record levels and market participants remain unconvinced that Greece will be able to achieve recently established fiscal benchmarks. European Central Bank President Jean Claude Trichet continued to apply pressure to Greece in order to force the country to drastically reduce the union's biggest budget deficit. Noting that the country will not receive any favors from European Union policy makers, Trichet continues to battle with an administration boasting a budget deficit that is equal to 12.7% of overall gross domestic product.

Latest Plans
Just two weeks ago week, Greece adopted a new deficit reduction plan which will take place over three years and aims for a budget gap of 9% this year alone. However, the plan also includes the country selling more than $75 billion in debt to help fund the current strategy, according to Thomson Reuters. As a result, speculation remains high that this is a hefty price to pay for EU staying status and the feasibility of this plan may be a little on the thin side with the numbers being a little aggressive.

Bottom Line
Market sentiment reflects the underlying pessimism as Greek bond yields have seen a surge of double digit increases as investors exit en masse to safer assets. Yield spreads, in comparison to EU equivalent bonds, have additionally widened as swaps for the country's debt have also skyrocketed. The current situation has sparked numerous downgrades from a number of rating agencies. Most notably, Fitch Ratings and Moody's Investors Service have noted the potential for Greek bonds to be excluded from further central bank market operations. As a result, the currency will likely remain under pressure until formidable evidence of a recovery surfaces.


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