From the August 01, 2011 issue of Futures Magazine • Subscribe!

Euro waiting on Greece

The euro has been gripped by the sovereign debt crisis in Greece and fears that it may spread to other periphery nations. As such, it has experienced huge volatility over the last couple months as European officials have struggled to come to a compromise.

“[The Greek debt crisis] is not only the biggest factor, it’s been the only factor. If you look over the last two months, there’s been a lot of volatility, but it’s been in a fairly limited range. If this most recent debt agreement is executed and funded well, it’s the first real attempt that might be successful. If it plays out, the euro may have some potential on the upside,” says Joseph Trevisani, chief market analyst at FX Solutions. He says that investors need to watch the outcomes of the European debt crisis as well as what U.S. politicians agree to regarding the debt ceiling. For mid-August, he puts support at $1.4050 and resistance at $1.4550.

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Michael Boutros, currency analyst at FXCM, says the latest crisis goes beyond Greece and will trade on news beyond the bailout agreement. “There’s a lot of buy the rumor, sell the news reaction to the results of the [Greek debt summit],” he says. “It’s not the Greek debt per se, because some sort of default already is factored in; the major concern still is contagion spreading to other peripheries.” He expects the euro to taper off in the coming weeks as people realize just how the bailout will be structured and the effect it will have over the entire region. Additionally, he said investors can watch forward-looking indicators such as Eurozone PPI and consumer confidence. Boutros puts support at $1.40 and resistance at $1.47 and $1.50 for mid-August.

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