Will Europe come to the rescue of one its own? The markets are still not entirely convinced. Although EU officials spurred on by France and Germany agreed that some form of support was needed the lack of detail came as a disappointment. Differences in opinion on how help should be provided meant that markets had nothing concrete to digest aside from a general agreement to provide assistance if needed.
The EU validated Greece’s plans to cut its budget deficit by 4% this year but clearly backed away from committing taxpayers’ money to the country given the potential public backlash that supporting a country widely believed to have fudged its way into the EMU, would involve. The end result was a further sell-off in the EUR although equity markets showed a bit more resilience which prevented a sharper fall in EUR/USD.
Risk currencies generally are putting in firmer performances, with the AUD helped in part by the shockingly strong employment report and higher commodity prices. The AUD and to a lesser extent the NZD are likely to continue to bask in the warm glow of these factors, with AUD/USD setting its sights on technical resistance around 0.8944. EUR/USD is the weakest link and continues to trend lower, with strong technical support seen around 1.3583.