The EUR/USD was under pressure on Friday, falling to the mid-1.11 region after the International Monetary Fund walked out of debt negotiations with Greece, while the European Union considered for the first time the possibility of a default.
The EUR/USD bottomed out at 1.1152. It would subsequently recover the 1.12 handle, consolidating at 1.1230. The EUR/USD had opened at 1.1317. The pair faces a neutral outlook on the 1-hour chart, with initial support likely found at 1.1182. A break below that level would expose 1.1106 followed by 1.1030. On the upside, initial resistance is likely found at 1.1334. Above that level, 1.1410 and 1.1486 are the next resistance tests.
The EUR/USD is trading below its 100-day simple moving average (1.1268).
In economic data, Spain’s inflation rate remained negative in May, falling 0.3% annually in EU-harmonized terms. Compared to April, however, Spain’s HICP inflation rate was 0.4%.
Separately, Eurozone industrial production rebounded in April, albeit at a slower rate than forecast. Industrial production advanced just 0.1% in April after falling 0.4% the previous month. Compared to April 2014, industrial production was up 1.1%.
Shaky bailout negotiations between Greece and international creditors stole the spotlight on Friday after the markets learned that the IMF dramatically walked out of the meeting room with Greek representatives. Meanwhile, the European Union was reportedly considering for the first time the possibility that Athens could actually default at the end of the month should it fail to make €1.6 billion in debt repayments.
EU officials are reportedly pessimistic that a deal could be brokered at next week’s Eurogroup meetings, leaving the options of a bailout extension or even default as the more likely scenarios.
Talks between Greece and its troika of creditors – the IMF, EU and European Central Bank – have gone in circles since Athens was granted a four-month bailout extension back in February. European Council President Donald Tusk warned Athens there was no more time for gambling. Tusk had met with Greek Prime Minister Alexis Tsipras in Brussels on Wednesday.
The European stock markets were down across the board on Friday. The FTSE 100 in London was down 0.9%, the DAX in Frankfurt was down 1.8% and the CAC in Paris tumbled 2%.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.