EUR/USD Sep. 14 – Marches Steadily Higher After QE3

EUR/USD  is on high ground above 1.30, but capped under the next resistance. The Federal Reserve announced QE3, in an open ended manner, while continuing the twist. The aggressive policy steps didn’t result in an immediate crash of the greenback, but rather a slow demise. European finance ministers meet in Cyprus. Will Spain make the move and ask for aid? Or will the wait continue as yields are low? Intense negotiations are likely going on behind the scenes. There are some additional interesting figures from the US to close this very exciting week.

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

EUR/USD Technical

• Asian session: Euro/dollar completed the move above 1.30.
• Current range: 1.30 to 1.3060.

Further levels in both directions:    

• Below: 1.30, 1.3060, 1.29, 1.2814, 1.2750, 1.2670, 1.2624, 1.2587, 1.2520, 1.2460, and 1.24.
• Above: 1.3060, 1.3105, 1.32 and 1.3290, 1.34, 1.3437, 1.3480 and 1.3540.
• 1.30 turns into support, but 1.2960 should be noted.
• 1.3060 is an important line. A break higher could result in a fast rally.

Euro/Dollar  above 1.30 after QE3 – click on the graph to enlarge.

EUR/USD Fundamentals

• 9:00 Euro-zone  CPI. Exp. 2.6%. Core CPI exp. 1.7%.
• 9:00 Euro-zone  Employment Change. Exp. -0.2%.
• 12:30 US  Retail Sales. Exp. +0.7%. Core sales exp. +0.7%.
• 12:30 US CPI. Exp. +0.5%. Core CPI exp. +0.2%.
• 13:15 US  Industrial Production. Exp. +0.1%.
• 13:15 US  Capacity Utilization Rate. Exp. 79.3%.
• 13:55 US Consumer Sentiment. Exp. 74.1 points. See how to trade this event with USD/JPY.
• 14:00 US  Business Inventories. Exp. +0.3%.
• 17:00 US FOMC member  Dennis Lockhart talks.
• 17:45 US FOMC member  Sarah Bloom Raskin talks.

EUR/USD Sentiment

• QE3 Announced:  It finally happened. The Fed launched an open ended program worth $40 billion dollars of monthly buys of Mortgage Based Assets in order to help the housing sector. This comes in addition to the existing Twist program worth $45 billion a month. The pledge to keep rates for a lower period of time was extended to 2015 as expected. This aggressive easing was later justified by Bernanke, who also said that the Fed is looking at the general picture of unemployment (including the participation rate). As this was partially priced in, the reaction was choppy but not directional at first.
• Everything ready for Spain:  In a highly-anticipated decision, Germany’s Constitutional Court  upheld the legality of the European Stability Mechanism as it stands for Germany, with some conditions. This comes on top of the ECB’s OMT program – unlimited bond buys of peripheral debt, given that the countries in question ask for aid. And now, everybody continues waiting for a Spanish aid request. The government in Madrid holds weekly meetings on Fridays, and finance ministers from all the EU meet in Cyprus. Expectations for a deal have been played down so far. Spanish yields have fallen after Draghi’s OMT and the court approval, but Spanish problems continue to bubble, as recently seen by the massive rally for Catalan independence and the immediate injection of money to Bankia.
• Pro euro parties strengthen in Netherlands election:  In a tight election that could affect the  Netherlands’  position in the Euro-zone, the conservative Liberal party has claimed  victory.  Caretaker PM Mark Rutte will now have  to cobble together a coalition government. The results calmed fears that Holland is drifting away from the pro-euro and pro-austerity camp.
• Greece struggles troika:  Greece’s  three coalition partners  are still unable to agree on new austerity, as the economy continues to contract.  In the meantime, anti-austerity parties have gained in the polls, and dismal unemployment figures worsened, as the unemployment rate rose to a staggering 24.4%, up from 23.5%. The government has no easy task in trying to implement cuts of 11.5 billion euros, which is necessary in order to received further bailout payments. Talks about a third bailout program became more loud in recent days, as Greece is nowhere close to meeting targets.