Euro Holds for the Moment above $1.20

After being crushed, the euro is stabilizing for the moment. The combination of the reassessment of the French PM comments and the disappointing US employment data by be contributing to the more stable tone as Europe prepares to close the week. There is a Eurogroup meeting of euro zone finance ministers on Monday and more jawboning is likely.

The stress in Europe is now well beyond Greece and the periphery, including Hungary, which is on the hot seat today. Note that S&P just lowered the rating of the French state-run railroad SNCF to AA+ from AAA. Core spreads--Netherlands, France and Belgium, for example are all widening.

Clearly the $1.20 level is the next important threshold for the euro. It is hard to talk about the upside still as anything other than terribly limited and cent bounces or so will likely be sold. The $1.2150 area should now contain upticks. A break of $1.20 would likely bring in new selling as option structures and stop losses are triggered. The potential is for a quick 1-1.5 cent decline on a break of $1.20.