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EUR/USD feeling the squeeze
It is now almost a month since we saw EUR/USD set its lows for the year at the $1.0460 level and subsequently bounce back up to $1.1000 before the sellers re-emerged. Today’s fresh squeeze in EUR/USD has taken it to within 100 pips of this mark.
Fundamentally not much has happened in the last 24 hours to trigger this selloff, however, every day of inaction from Greece does take them a step closer to the defaulting or leaving of the eurozone. The Financial Times has stated that they see the Greek government doing just that – a claim that has been refuted. The problem is that currency traders probably give a little bit more credibility to what the FT says than they do to what the Greek government state.
It is also worth noting that JP Morgan has claimed that 'the hurdle for the European central bank [ECB] to taper its purchases before September 2016 is very high'. Considering that it was only the third version of quantitative easing (QE) that ultimately worked in the US, it might be viewed as optimistic that the ECB get it right on its first attempt.
Further pressure on the eurozone should ensure that EUR/USD continues to drift and a retest of year lows looks inevitable.