Frankfurt - Europe returns to normal trading after an elongated holiday weekend. Greece dominates the headlines, while political developments in Spain also deserve some attention. Selling pressure on the euro continues while a strong greenback is seen across the board.The shared European currency plunged to its lowest since April 28 due to a strong USD and ongoing worries over Greece, trading 0.73% to $1.0896 during the European morning session.

 

 

Bond yields from the EU periphery spiked on Monday and that weighed on equities in Spain and Italy. On the flip side, a weak euro could be a bright spot for European equities.In Spain, current PM Mariano Rajoy’s PP party suffered its worst result in 20 years as voters punished his government for four years of austerity, and record high unemployment.In Greece, it now looks certain that the country will not be able to make its upcoming repayments to the IMF in June unless it achieves a deal with its international creditors, hence the possibility of a Greek default early next month appears to be moving closer.

 

The US session will be in focus, with April's Durable Goods Orders and New Home sales, and May’s Consumer Confidence Index being the highlights. Both the Fed’s Mester and Fischer continued to point to a 2015 lift-off, but both stress it is data dependent.US Federal Reserve Vice Chairman Stanley Fischer said in Israel in the previous session that the beginning of the rate hike cycle will be determined by data, not date, as they weigh up the risk of raising rates prematurely against playing catch-up later. The central scenario still points to a September lift-off. “Our processes are not date determined, they are data determined” Fisher said in Israel.

 

Technical Analysis

Volatility compared to just a few days back is very mild, as the euro has stacked in the trading range below the very important level of support at $1.11.Right now we like the recent easing back below the 200-period simple moving average on the hourly chart and we are looking for an ideal short position entry point.Our goal for initiating selling is a spike in prices near to the previous strong support around $1.11, which we believe is separating bulls and bears.