EUR/USD has fallen to the new minimums. However, as the net short positions on the euro remain extremely big, the ever-present risk of correction up remains high.
The new week in the euro area will be light on the economic data. On March 9 the Eurogroup meeting will take place. Greece will be on the agenda. A couple of weeks ago the euro zone finance ministers approved a 4-month extension of the Greek bailout program and the initial list of reform which the nation has to conduct in return. On Monday Greece is expected to present the details of these reforms. According to the head of the Eurogroup, Athens can get 7.2 billion euro remaining in its bailout as early as this month if the Greek government starts adopting necessary reforms. Greece is now in a very difficult position as it has to make large debt repayments in March and has practically no cash. If it looks like the nation will get money rather sooner than later, the impact on the euro will be bullish.
Also on Monday the ECB will start its large-scale quantitative easing program, so divergence in monetary policy between the US and the euro area will remain one of the main themes. The ECB will purchase bonds with negative yields, and this should dispel concerns that it won’t be able to achieve its balance sheet target.
At the same time, while the ECB lowered 2015 inflation forecast justifying QE, its president Mario Draghi predicted improvements in the euro area’s economy and said that the central bank’s actions do bring positive results. This should make the market feel a bit better about the euro.
Although EUR/USD is much oversold, it went below 1.1210 (61.8% Fibo of the advance in 2000-2008). Resistance in the 1.1260/70 area is expected to be strong. Support is at 1.08 and 1.05.