The Greek debt is still containing the current market sentiment by the EU Summit today. The forex market is moving by the news about this problem development and whether there is a joint help to rescue its deficit and illiquidity economic situation from the EU members or not and what the cost can be, if there is no bailing out plans depending on the Greek efforts for restabilizing its current deficit which is looking unsustainable and what the impact can be in each case on the single currency which is looking really hurt by this problem which threat other EU members like Spain and Portugal with no clear mechanism to the market for solving such economic situation inside the Euro zone which can effect negatively on the single currency back securities holding which is underpinning the current risk aversion sentiment effecting badly on the equities markets.

The single currency gets above 1.38 versus the greenback when there are coming good news or announcements about this problem by a joint action from the EU members and the ECB and gets down below 1.37 when the announcements come with no rescue plan depending on the Greek efforts for getting its deficit to GDP ration below 3% which is looking not soon to come to all pundits at the current struggling growth rates which resulted from the credit crisis even the ECB could not stop any of its accommodative easing actions worrying about this nascent recovery until now which can put more pressure on the reforming plans in Greece from another side. However Trichet seemed convinced with Greece, Spain and Portugal abilities to get over their deficits problems last Thursday after the ECB decision to keep the interest rate unchanged as the inflation is still well anchored over the medium term and the economic growth is still in need for the ECB support.

Trichet has just appreciated the current Greece efforts in fighting the consolidation of its deficit repeating that it is the same for all the European countries to take the required steps for driving down the deficit rate below 3% of the GDP as the treaty of Maastricht referring to the IMF calling for driving this ratio below just 6% and the excessive deficit of other industrial countries like US and Japan which have become more than 10% of the GDP while the 16 members of the Euro obligate themselves to keep it below 3% and this looked the same view he will represent today by god's will in the EU Summit.

The single currency is still trying to find a place above 1.38 versus the greenback after his comments which lead to breaking of 1.382 reaching 1.3585 by the end of last week which can form an intermediate support right now followed by 1.343 which was the formed bottom of last May and then 1.29 whereas the pair higher low of its rally reaching 1.513 in the beginning of last December has been formed while the main resistance is emerging just above 1.40 psychological level when it failed to break above 1.404 earlier last week as the breaking below 1.40 could add momentum to the currency downward trend.


Best wishes


FX Consultant

Walid Salah El Din
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