Euro Faces a Move To and Below 1.2800 if Risk Falters after EU Summit

The euro's more thematic issues will contribute to the global balance between risk and reward in its own (if passive) way. A lack of progress on Greece and Spain is commonplace at this point, but we are quickly reaching the extent of the market's tolerance. And, a strong shift in general confidence levels will accelerate that fact. Greece will return to the negotiation table with the Troika moving forward, but the market has priced in their receiving the next tranche of aid at this point. A convincing, euro bullish outcome likely rests with further favorable conditions to its financial position (more time, restructuring or more funds).

Through the end of this past week, the euro managed to close a bullish performance against all major counterparts with the exception of the Australian dollar. Yet, given the comparison between the first half and second half of the week along with the downturn in fundamental forecasts, it certainly didn't feel like a favorable week for the currency. Traders' focus this past period was heavily concentrated on a Euro-area event: EU Summit through the final 48 hour of trade.