It is no secret that the future of teh Euro is in jeopardy with the debt crisis looming over markets and no resolution in sight. Yet the shared currency has been remarkably resilient in the face of these headwinds, mostly because of US dollar weakness thanks to the US Fed, Bernanke, and easy monetary policy.
Despite the weaker US dollar, the Euro is in a much worse position than it was when news of the debt crisis was revealed, as the market has driven interest rates in the countries with debt problems to unsustainable levels and the ECB and finance ministers have done nothing about it. Now it is questionable whether or not Greece can avoid default, and what the ramifications for the rest of Europe may be if this occurs.
Almost as telling is the technical picture for the Euro. Below we have a weekly chart of EUR/USD and it shows that we are trading just under the 38.2% Fibonacci retracement level and are facing a move lower to 1.30. The picture for the Euro is not one of health and it will be interesting to see if Euro zone leaders can clean up their own mess, or will be bailed out on Wednesday by Bernanke and the Fed. Stay tuned!