EUR/USD Technicals, Barclays Sees 1.33 In One Month

Euro Man (source: rockcohen on flickr)
EUR/USD and the Euro FX December Future are back where they were last night after Italy's downgrade. Ran Squawk just reported that Barclays sees EUR/USD at 1.33 in one month and 1.25 in 3 months. It is currently trading at 1.36741 and testing a steep downtrend line. If it can't break through the trend, it will probably retest the 9/12 low of around 1.35000. If that gets taken out, I don't see any support until 1.287, or the January 2011 lows.

The market is speculating on whether Greece defaults or gets its next tranche of bailout money from the IMF/EU, or establishes a fiscal union with euro bonds. If Greece or another country in the euro zone defaults, then the European banking system would be at risk of contagion. So what is going to happen? Are China and Brazil going to provide a backstop? I see Greece raised 1.65 billion euros in a 13-week Treasury bill auction yesterday. According to CMA Datavision's Sovereign Risk Monitor, Greece 5Y CDSs (at 5,639 basis points) have a default probability of 94% and Portugal 5Y CDSs (at 1,271 basis points) have a default probability of 63%. They are at the top of the list, then Ireland at 50%, Italy at 36% and Spain at 30%. See my link fest from a few hours ago for articles to read. See charts after the jump.


Euro FX December Future - OptionsXpress

By the way, back in July, Simon Derrick, Chief Currency Strategist at Bank of New York Mellon, predicted Euro/Dollar to be in the low 1.30s by year end, and the technical analysts at MIG Bank were spot on as well.