Euro dollar is pushing higher once again, recapturing the broken uptrend line. Optimism about a wide approval of the new EFSF powers in Germany, a big drop in unemployment there and end of month / quarter flows aid the pair. Will we see a really big move higher? There are quite a few events today.
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: Quite an active session that saw the pair emerge from lows and move higher.
- Current range: 1.3630 to 1.37.
- Further levels in both directions: Below 1.3630, 1.3550, 1.35, 1.3430,, 1.3385, 1.3322, 1.3250.
- Above: 1.37, 1.3750 1.3838, 1.3950, 1.4030.
- The previous uptrend support turned into resistance, which is now broken.
- 1.37 is the immediate cap, but 1.3838 is more important.
- On the downside, there’s still a long way to go before serious support.
Euro/Dollar on the rise – click on the graph to enlarge.
EUR/USD Fundamentals
- 7:55 German Unemployment Change. Exp. -9K. Actual -26K. Significant upside surprise.
- 12:30 US Unemployment Claims. Exp. 420K.
- 12:30 US Final GDP. Exp. +1.2%.
- 14:00 US Pending Home Sales. Exp. -1.7%. See how to trade this event with EUR/USD.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Germany Votes: After the parliament in Finland approved the stronger powers for the European bailout fund, the German parliament is now in the limelight. It’s clear that it will be approved, but the sentiment depends on the character of the majority: Will Merkel lean on the opposition or enjoy a vast majority within her coalition?
- Multi-trillion bailout fund?: The hopes of leveraging the bailout fund (EFSF) are gaining traction despite fierce denials, especially from Germany. This way, the fund will be able to safeguard Italy and Spain as well. This talk pushes the euro higher. Some German lawmakers fear that that the “grand plan” which the market thinks is coming will be revealed after the approval.
- Troika returns but default still looms?: The EU / IMF troika is returning to Greece after the parliament there approved the property tax. They are expected to give their stamp on the long delayed tranche of aid to Greece, before the country runs out of money. But, the talks about a default will not die. Also here, denials don’t help. According to reports, Greece will be held on a lifeline for 6 weeks, and will default at the beginning of November. The time will be used for preparations in other countries and within banks. These plans may also be awaiting the German parliament’s approval.
- Chinese worries: Talks about a hard landing for China are also weighing on the euro, as it also depends on demand from Asia and China in particular.
- End of month / quarter flows: Some funds are re balancing their portfolios towards the end of this period, which has been characterized by stock market drops and a stronger dollar. This is one of the reasons for the current rise. Here are more reasons for the euro strength (and why it’s probably temporary).
- US recession worries: While the focus is naturally on the European debt crisis, also the US economy remains weak. Most figures published this week are weak. Today’s final GDP read may not be really final, as we’ve seen a very late revision to Q1 GDP. Today’s number is for Q2 and an upwards revision will help lower the recession worries. The other figures, which are more updated, will likely provide a reminder of weakness.
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