Euro dollar is free falling to low support as the Greek crisis worsens on all fronts: from French banks to Greeks. Quite a few major US figures await us. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: The pair failed to hold on to high support and reversed its gains. The move accelerated in the European session.
- Current range 1.4282 to 1.4375.
- Further levels in both directions: Below 1.4282 1.4160, 1.4030, 1.3950, 1.3860, 1.3750.
- Above: 1.4375, 1.4450, 1.4550, 1.47, 1.4775, 1.4882 and 1.4940.
- The old peak of 1.4282 is important support with the critical 1.4030 still in the distance.
- 1.4375 is only weak resistance on the way to 1.4450.
Euro/Dollar free falling – click on the graph to enlarge.
EUR/USD Fundamentals
- 9:00 European Industrial Production. Exp. -0.1%. Actual +0.2%. Surprise ignored.
- 12:30 US CPI. Exp. +0.2%. Core CPI exp. +0.2%.
- 12:30 US Empire State Manufacturing Index. Exp. 13 points.
- 13:00 US TIC Long-Term Purchases. Exp. 45 billion.
- 13:15 US Industrial Production. Exp. +0.3%.
- 13:15 US Capacity Utilization Rate. Exp. 77.1%.
- 14:00 US NAHB Housing Market Index. Exp. 16 points.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Greek emergency summit failed: The emergency meeting of Euro-zone finance ministers in Brussels failed to reach an agreement as the rift between the ECB and Germany continues. Another meeting is scheduled for next week.
- Warning for French banks over Greece: 4 large French banks were put on review by Moody’s for downgrade due to Greek exposure. According to another rating agency, S&P, Greece has the lowest credit rating in the whole world, CCC.
- Greek strike: A 24 hours general strike has been announced in Greece as a protest against the austerity measures. In addition, one member of the ruling party quit, narrowing the majority of the government.
- German banks ready to contribute: Over the weekend, it seems that pressure for restructuring of Greek debt pushed the German banks to volunteer to participate in Greek losses. This joins approval from Jean-Claude Juncker to the German plan and a comment made by a senior German adviser that a Greek default could be weathered. The ECB is cornered.
- Strong vigilance, but other worries: Trichet did make the expected hint for a rate hike using the code words “strong vigilance”. On the other hand, he expressed concern over the global economy, repeated the “strong dollar policy” and also continued to reject any Greek restructuring. The fall of the euro that began during the presser continued. We’ll get more of Trichet now.
- Contagion risks in Ireland: There are fears in Ireland that a Greek restructuring will hammer Irish bonds, sending them to junk status and keep Ireland away from the market for too long. An Irish minister saw “benefits” for Ireland in the German plan.
- Contagion risks in Spain: As the new governors and mayors begin working after the local elections on May 22nd, the worries about Greece send Spanish bonds to test the peak levels. 10 year notes yields remain above 5.5%, after a calm month. The critical level is 5.60%. The new authorities might reveal a huge pile of hidden debt
FXCM Speculative Sentiment Index shows smaller gains for the euro: 56% are short, down from 59% beforehand. According to this contrarian index, this shows a weaker recovery for EUR/USD.
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