Uncertainty Over Greece Bailout Funds Pressures EUR/USD

The EUR/USD traded slightly lower on low volume on Monday. The U.S. bank holiday may have had something to do with the slow trade. News about Greece continues to be at the forefront.

Despite the fact that the Greek parliament agreed to a strict cost-cutting 2013 budget, its approval doesn’t mean acceptance by its international creditors. This means that additional bailout funds which have been held up since June may not be made available at this time.

The move by the Greek parliament fulfilled its international lenders requirement to make further budget cuts but the creditors may not deliver the much-awaited tranche of financial aid for a number of weeks. The 31.5 billion Euros ($40 billion) that is due Greece is long-over due and needed to stave off insolvency.

With the Euro in the grips of uncertainty, traders held the single currency below a key technical level at 1.2735, indicating weakness. A break through Friday’s low at 1.2689 could trigger the start of a break to the next major support level at 1.2607.

Traders continued to press the GBP/USD lower. The weakness was attributed to position paring ahead of Tuesday’s inflation report. The Bank of England is expected to show a drop in growth and inflation projections that could lead to further asset purchases by the central bank.

Technically, the Sterling is trading on the bearish side of a retracement level at 1.5966. The main trend also turned down late last week when the October 23 bottom failed at 1.5983. A weaker than expected report on Tuesday could trigger the start of an acceleration to the August 28 bottom at 1.5754.

January Crude Oil fell on Monday as oversupply issues continue to plague the market. Since Hurricane Sandy hit the Eastern Coast of the U.S. two weeks ago, traders have held crude oil in a tight range due to uncertainty over the true supply and demand situation.

Overall, the slowdown in the global economy, expectations of a European recession and the possibility of a U.S. recession if legislators can’t reach a deal on end of the year tax hikes and spending cuts, continue to pressure prices.

The possibility of escalating tensions in the Middle East could put a bid in the market, but unless they directly threaten supply, speculators are expected to remain on the sidelines.

December gold traded lower in light trading. With the stock market stable, some of the uncertainty which drove the market higher last week has been lifted. Technically, the market is straddling a major 50% resistance level at $1735.30. The stronger U.S. Dollar is also a key factor weighing on the dollar-based gold market.