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Euro/dollar is rising back to levels seen after the Greek elections, higher than last week’s highs. It is still far from the next resistance line.

Hope dominates markets for now, coming from 3 directions. A quick update:

EUR/USD is touching 1.27, beyond the levels seen on Friday. It continues a steady move up that began earlier with the break of the January low of 1.2624.

Here are the 3 main catalysts:

  1. Coalition hopes in Greece: Talks about a wide 3 party coalition are going on very well in Athens. A declaration could come quite soon. This is not a big surprise, but certainly good news after Greece didn’t have a government for a very long time, and the country is in dire straits.
  2. Spanish relief: Spanish 10 year bond yields fell for a change. This is not a material change – they are still at 7.03%, but at least things didn’t get worse for the euro-zone’s third largest country.
  3. Hope for QE3: In the US, the FOMC began its meeting and will announce decisions tomorrow. According to Goldman Sachs and other market movers, new monetary easing is expected, either in the form of the long awaited QE3 or in the form of an extension of Operation Twist which ends at the end of the month. Given the current yields, inflation, improvement in housing and other indicators, markets may prepare  themselves  for a big disappointment.

The next level to watch is the post Greek elections high of 1.2748. The next significant resistance is 1.2873. On the downside, 1.2540 is an important level.

See more in the Euro USD forecast.