EUR/USD is now falling the troubles of Belgium’s Dexia bank (possibly related to Greek exposure) and also on lower inflation in Germany. The rally in the Asian session is reversed. We still have important US events and the usual Euro depression at the end of the week. Where will it close? Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
- Asian session: Yet another very active session sends the pair towards the 1.4282 resistance line. It’s losing ground from there.
- Current range 1.4160 – 1.4282.
- Further levels in both directions: Below 1.4160, 1.4030, 1.3950, 1.3860, 1.3760, 1.3570, 1.3440.
- Above: 1.4282, 1.4375, 1.4450, 1.4580, 1.4650,
- 1.4030 was overridden several times now. But the first, initial dip, could be a warm up for the real thing at the end of the week.
- 1.4282 proved to be a strong line once again.
Euro/Dollar falling from highs – click on the graph to enlarge.
- German CPI: Still incomplete, but initial releases from several German states show that prices are falling. This is euro negative.
- 8:00 European M3 Money Supply. Exp. +2.5%. Actual 2%. Euro-negative.
- 12:30 US Personal Spending. Exp. +0.5%.
- 12:30 US Personal Income. Exp. +0.4%.
- 12:30 US Core PCE Price Index. Exp. +0.2%.
- 13:55 US Consumer Sentiment (revision). Exp. 72.5 points.
- 14:00 US Pending Home Sales. Exp. -0.9%. See how to trade EUR/USD on this event.
For more events later in the week, see the EUR/USD forecast
- Belgium Dexia Bank in trouble because of Greece?: This large bank sees its shares suspended from trading possible due to high exposure for Greek debt.
- Weak US: Growth was weak in Q1, only 1.8%, according to the second release as well. Also jobless claims refuse to fall.
- Greek Austerity stuck: Greek prime minister Papandreou announced new cuts and privatizations and said that there would be no restructuring of Greece’s debt. He refused to comment on an option of “re-profiling”. The main opposition party rejects the new cuts. Germany wants to delay the decision as much as possible. This delay is meant to prepare the public. But the markets don’t need preparation. They’re moving. It is clear that Greece will default.
- Inflation not so bad?: The lower German inflation as reported in the initial CPI release adds somewhat soft comments by Bini-Smaghi earlier in the week.
- Spanish protests and yields calm: Protests are still active in the main squares of Spanish cities, but there is no new development after the regional elections. These elections were a blow to the ruling socialists. The new authorities might reveal a huge pile of hidden debt. Spanish yields on 10 year remain stable at 5.3% – significantly lower than in previous days, closer to the bottom of the range.
FXCM Speculative Sentiment Index shows larger gains for the euro: 58% are short, up from 50% yesterday. According to this contrarian index, this shows a push back up for EUR/USD.