EUR/USD reversed down from the 1.1125/1100 area and fell to 1.0900. Will the single currency keep sliding?
The IMF Managing Director Christine LagardeDuring the past week, the negotiations on the third 85-billion-euro Greek bailout program have finally started. The nation’s Prime Minister Tsipras has managed to make the rebellious lawmakers of his party agree to hold extraordinary congress in September after Greece is expected to have sealed a new bailout deal with its international creditors. Still, tensions are not over. The IMF has made it clear that it will not contribute to another bailout for Greece without debt relief and real economic reforms. German finance minister Wolfgang Schaeuble even proposed Greece a “temporary” exit from the euro area.As a result, we are sure that further Greek talks will be very difficult. The euro lacks bullish drivers, while the US dollar, on the contrary, has strong upside potential.There are no important events in the euro zone, which could drive the euro in the week ahead, so the focus will be on American releases. Note, though, that despite optimism about the US GDP, EUR/USD has managed to hold above 1.0900. The key support is lower, in the 1.0820/00 zone (bottom of the 3-month range). The general downtrend is still in place, and we will look to sell on increases to resistance in the 1.1000/1020 area.