Euro dollar is trading quietly after the storms of recent days. It is clearly capped under resistance. With holidays in quite a few countries, liquidity is low. Will trading remain quiet? Or will it be a wild Friday with exaggerated moves due to this low liquidity? Italy is not holiday.
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: Another quiet session.
- Current range: 1.3550 to 1.3650
- Further levels in both directions: Below 1.3550, 1.3480, 1.3360, 1.3250.
- Above: 1.3650, 1.3725, 1.38, 1.3838, 1.39, 1.3950, 1.4050, 1.4130, 1.42, 1.4250, 1.4282.
- 1.3650 made a complete switch from support to resistance after yesterday’s collapse. Further important resistance is at 1.3838.
- 1.3480 was the trough of the current move down, on the road to 1.3145.
Euro/Dollar in tight range – click on the graph to enlarge.
EUR/USD Fundamentals
- 10:30 Austerity debate begins in Italian parliament.
- 14:55 US Consumer Sentiment. Exp. 61.3 points. See how to trade this event with USD/JPY.
- 18:15 US FOMC member Janet Yellen talks.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Italian vote: today: The Italian Senate will vote on new austerity measures already today, earlier than expected. This will pave the way for Berlusconi’s departure and for a new government. Berlusconi is seen as an obstacle, although Italy has enough problems also without him. Mario Monti is the leading candidate to head the new government. A technocrat government is expected before elections. Approving these measures will likely help the euro.
- French fear: An “error” on the website of rating agency S&P caused fear that France’s downgrade is imminent and weakened the euro. While this technical glitch was fixed, a downgrade for the euro-zone’s second largest economy seems imminent. According to the bond market, France is going south.
- Spanish squeeze: Spain managed to distance itself from Italy, but was also required to make adjustments to its budget. This demand comes from the European commission. The euro-zone’s fourth largest economy is going to the polls next weekend.
- ECB Ready to Accelerate?: The rise in margins for Italian bonds sent yields above the scary 7% and sent the euro crashing down. ECB bond buying only marginally helped. There are rumors that Mario Draghi will step up his efforts and buy a lot of bonds. Yields are already significantly lower, under 7%, . Eventually, this could turn into a full scale QE program that will weigh on the euro and has moral hazard implications.
- A new Greek government: Former ECB member Lucas Demetrios Papademos was appointed as the Greek Prime Minister. He still hasn’t named the cabinet members. This wide unity government is supposed to oversee the second bailout and more austerity. Will it succeed?
- Geopolitical tension: The IAEA report about Iran triggered more tension, as expected. The talks in Israel about striking Iran and the Iranian threats to retaliate have stepped up. This also helps the dollar and yen against all the rest. Nevertheless, looking deeper into the situation shows that there is little chance of a real escalation. Here are 5 reasons why Israel will not attack Iran.
- Recession coming to Europe: A collapse in French and German industrial production raise the worried voices about a recession. Draghi, the new president of the ECB spoke about a mild recession. .
- Encouraging US figures: Recent data that came out of the US was encouraging: another small drop in jobless claims, a smaller trade deficit and a drop in import prices all help the US economy. Today we’ll see if consumers’ mood improved as well.
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