Euro Pressured by Peripheral Debt Concerns

The Euro is down across the board on Monday amidconcerns that peripheral debt problems are resurfacing.

The Euro is down across the board on Monday amid concernsthat peripheral debt problems are resurfacing. Issues began to resurface lastweek, culminating on Friday when the 10-year Irish Bond yield stood at recordspread over the comparable German debt and similar Spanish/German yield Gaprose to its highest since mid-July.

The European Central Bank last week left its benchmarkinterest rate unchanged but it also did not reveal any plan to expand itsquantitative easing program unlike its U.S. Federal Reserve counterpart.

ECB President Jean-Claude Trichet offered no insight when hesaid during his post-meeting press conference that he could not say if theeasing was over. The resurfacing Irish debt issues indicate that the ECB stillhas serious problems to deal with before thinking about implementing a moreaccommodative monetary policy.

An unexpected fall in German industrial output alsocontributed to the Euro’s weakness overnight. Overnight it was reported thatGerman industrial output fell by 0.8 percent on the month in September, missingmedian guesses for a 0.5 percent increase.

Selling pressure began to hit the Euro on Friday when the U.S. governmentreported better-than-expected jobs data. Last week the Fed also announced itsquantitative easing plan. This news was already priced into the EUR USD soinvestors are likely going to start putting more emphasis on U.S. economicdata.

Technically the main trend is up on the daily chart so thecurrent weakness can still be called corrective in nature, triggered byprofit-taking. The two bottoms at 1.3733 and 1.3698 need to be violated beforethe trend turns down.

At this time, the market is testing a minor retracement zoneat 1.3990 to 1.3921. This zone is based on the short-term range of 1.3698 to1.4282. A pair of uptrending Gann angles at 1.3828 and 1.3763 may slow down therate of decline and also trigger technical bounces.