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Yesterday, European Central Bank President Jean-Claude Trichet came out with a statement saying that the idea of the euro coming to an end because of Greece’s problem was totally absurd and, in fact, “legally impossible!”

Despite Trichet’s assurance that the European Union will remain one solid unit, Greece’s big brothers in the region are unwilling to shell out money from their own pockets to extend a helping hand. In fact, Germany and France would rather have the heavily-indebted nation turn to the IMF for aid even if it might reflect poorly on the EU!

Germany has always been wary about a possible beggar-thy-neighbor situation in which Greece could suck up German taxpayers’ money in order to free itself from debt. This put them at odds with France, which has been more inclined to leave no brother behind. But France seemed to have second thoughts yesterday as French President Nicolas Sarkozy announced that they favored an IMF solution.

Other European leaders remain divided between solving the problem on their own and seeking help from the IMF. Some say that turning to the IMF would expose the weaknesses in the EU framework and could be harmful for the euro. Others are calling for a hybrid solution which would enable the EU to coordinate with the IMF for a joint aid package. Ahh, more squabbles…

Still, even without the help of the IMF, ECB, or other euro zone nations, the most recent budget report from Greece showed improvement. Greece’s finance ministry revealed that the country’s deficit has fallen by as much as 77% since January. The combination of increased government revenue (up 13.2%) and decrease in spending (down 9.6%) helped pushed Greece’s budget deficit back to €904 million, almost a fourth of the €3.99 billion deficit the year before.

The past few weeks, there’s been a lot of hesitation in the markets as traders just don’t know what’s going to happen in the euro zone. Is Greece going to default? Are Germany and France turning their backs on Greece? Will Greece be forced to run to the IMF? What’s going to happen to the EU?!? Should I throw a gyro at Cyclopip‘s one good eye?!

All this uncertainty has led to some up and down range-like trading on the EURUSD. After dropping below the 1.4000 mark earlier this year, the pair has been trading within a 350-pip range. The only reason why the pair hasn’t succumbed to a free-fall is that there have been signs of improvement elsewhere around the world. This has tempered risk aversion, keeping the euro afloat.

If the situation in the euro zone does not improve in the days or weeks ahead, the euro bulls could take another big beating from the forex market matadors. Presently, the EURUSD is treading support around the 1.3400 region. If sellers are able to push its price down past this mark, the pair could possibly fall all the way to 1.3000!

By then, the 1.3000 level should give the EURUSD some solid support. However, if this level breaks, not even the threescore men and threescore more could place the EURUSD the same as before. The pair could fall flat on its behind and possibly revisit its 2008 low of 1.2330. Then again, we’ll just have to wait and see the ultimate decision on this Greek issue before the EURUSD finds a definite direction… Till then, stay tuned!