Euro dollar is slowly testing lower ground below critical support and under the former uptrend line. The euphoria from the joint announcement by 5 central banks to provide dollar liquidity to struggling European banks is slowly fading. The week ends with two major US releases and also the finance ministers meeting. How close is the Greek default?
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: A quiet session saw the pair slide towards support at 1.3838.
- Current range: 1.3788 to 1.3838
- Further levels in both directions: Below 1.3788, 1.37, 1.3630, 1.3570, 1.3510, 1.3440, 1.3350, 1.3250.
- Above: 1.3838, 1.3788, 1.3838, 1.3950, 1.4030, 1.41, 1.4160, 1.4220 and 1.4282
- The uptrend channel that can be seen on the chart turned into weak support, but is still of importance.
- 1.3838 returns to its original role as support = it was the final frontier of a long term range.
- 1.3950 is immediate resistance above, with 1.4030 being of importance as well.
Euro/Dollar consolidating gains – click on the graph to enlarge.
EUR/USD Fundamentals
- 8:00 European Current Account. Exp. -5.6 billion.
- 13:00 US TIC Long-Term Purchases. Exp. 31.3 billion.
- 13:55 US Consumer Sentiment. Exp. 57.3 points. See how to trade this event with USD/JPY.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Dollar Liquidity Move Boosts the Euro: The dramatic announcement by 5 central banks to provide longer dollar liquidity for European banks provided a big relief for the euro, while the euphoria is fading out. Could this be a preparation for the Big Greek Default?
- Low chance of QE3: US inflation is still significant, and lowers the chance of an announcement of more QE in the upcoming FOMC meeting. The Fed might launch creative steps, but it already made it clear that the ball is in the court of the government. Today’s consumer sentiment will shed a little more light.
- Bearish forecasts: Pimco sees EUR/USD falling to 1.20 in the next 3-6 months. Deutsche Bank sees 1.30 in the next few months.
- Meeting in Poland: Finance ministers from all EU countries, and a special guest from the US, Treasury Secretary Timothy Geithner will attend a meeting in Wroclaw, Poland. They will discuss the current mess. There is speculation that Geithner will provide some advice from the Lehman Brothers collapse – he was the President of the New York Fed at the time. Will they coordinate the Greek default?
- Merkel, Sarkozy and Papandreu deliver optimism : Leaders of Germany, France and Greece spoke in a teleconference and provided optimistic statements. This helped the euro. Greek finance minister laid out a plan to impose a property tax that would close the 2 billion euros gap that the country has. Will it pass? Greeks are quite unhappy with this, but this could secure the next tranche of aid.
- Germany getting ready for future Greek default: On the other hand… German chancellor Angela Merkel is officially working to prevent a Greek default. One German minister said that a Greek default isn’t “taboo”. While more senior figures say that a default is bad and that Germany is working to avoid it, the German finance ministry is already working on plans to bail out the banks in two scenarios of a Greek default: one with Greece remaining in the euro zone, and another with Greece out of it.
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