EURUSD Slides after Major Technical Break

The EURUSD extended its decline further during the night after the pair sustained a clear technical break of its 200-day moving average line. Fundamentally, the Euro is struggling to deal with Greece’s ballooning debt that is also increasing worries about the financial state of other member countries of the Euro-zone.

The dollar also benefited from an increase in risk aversion caused by the news that some Chinese banks have been instructed to curb lending. The market has perceived that this development could slow China’s economic recovery because it will force a reduction in commodity demand.

Pressure could increase further on the Euro today because the last time the EURUSD broke below its 200 moving average line, the pair declined by 10 percent within a month. Expert consensus considers that there is a clear picture of Euro-zone weakness compared to the US situation which is currently under review.

As a result, the Euro is presently contenting with substantial selling pressure. Overnight, the EURUSD plunged by 150 pips to its current value of 1.4140 (see hourly chart) whilst the EURGBP fell by 120 pips to 0.8680.

US Data has just been released within the last hour with Producer Prices posting an increase of 0.2% in December versus an expected 0% whilst US Housing starts fell in December to 557k from 580k. The EURUSD has made no significant response to these releases as yet.