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EUR/USD Nov 21 – Volatile as Eurogroup Fails to Agree

EUR/USD is showing some volatility, after  a meeting between  the  Euro-zone  finance ministers and the IMF failed to reach a consensus on Greece.  The two sides will meet again on Monday to try and break the ongoing deadlock. However, the continuing  uncertainty over Greece’s debt payments  will only add to the pressure on the euro.  In economic news, today’s highlight is US Unemployment Claims. This key indicator is being released one day early, as US markets will be closed for the Thanksgiving holiday on Thursday.

EUR/USD Technical

  • Asian session: Euro/dollar  dropped sharply, touching a low of 1.2737.  The pair  is trading higher  in the European session.
  • Current range: 1.2750 to 1.28.

Further levels in both directions:    

  • Below: 1.2750, 1.2690, 1.2624, 1.2590, 1.25, 1.2440, 1.2390, 1.2250, 1.2140 and 1.2042.
  • Above: 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, and 1.3170.
  • The pair is testing 1.28 as it edges higher. 1.2880 is stronger.
  • 1.2750 is the next line on the downside.

Euro/dollar  volatile after  Eurogroup meeting disappoints- click on the graph to enlarge.

EUR/USD Fundamentals

  • Tentative: German 10-year Bond Auction.
  • 13:30 US Unemployment Claims. Exp. 415K.
  • 14:00 US Flash Manufacturing PMI. Exp. 51.2 points.
  • 14:55 US Revised UoM Consumer Sentiment. Exp. 84.3 points.
  • 14:55 Revised UoM Inflation Expectations.
  • 15:00 US CB Leading Index. Exp. +0.2%.
  • 15:30 US Crude Oil Inventories. Exp. 0.8M.
  • 17:00 US Natural Gas Storage. Exp. -27B.

For more events and lines, see the Euro to dollar forecast

EUR/USD Sentiment

  • Eurogroup, IMF deadlock continues: The Euro-zone finance ministers  and the IMF huddled in Brussels on Tuesday for over 12 hours, but the  marathon talks failed to produce a breakthrough over what action to  take  on the Greek debt crisis. The Euro-zone finance ministers wish to Greece  a two-year extension, till 2022, to  slash its debt to 120 percent of GDP.  Currently, the  debt to  GDP ratio stands at 176 per  cent. The IMF is against  the extension, preferring  to see EZ member states  write off some of  Greece’s debt. Without some agreement,  the troika cannot give Greece the next tranche of aid, which amounts to some 44 billion euros.  Even if the parties hammer out an agreement next week, the deal will still have to be approved by the parliaments in several countries. For its part, Greece continues to implement  reforms demanded by the troika. These include an overhaul of the tax system, the creation of a committee to supervise budget execution and further privatizations.
  • France hit by downgrade: The Moody’s credit agency downgraded France from its AAA rating to AA1. The agency followed up with a tough assessment, warning that France’s economic outlook remains “negative”, and that it had doubts that the Hollande government could implement necessary structural reforms and spending cuts. Moody’s also noted that the French economy was at risk due to other struggling Euro-zone members. The downgrade followed a scathing report in the prestigious Economist magazine about the perilous state of the France’s economy, entitled “The time bomb at the heart of Europe”. The French government is  fuming over the downgrade and unflattering  magazine article,  which may well cause investors and companies to think  twice before doing business with France.
  • Markets  positive over fiscal cliff co-operation: The markets were pleased with a recent meeting between congressional leaders and President Obama as Republican and Democrats sounded upbeat about reaching an agreement over the looming fiscal cliff crisis.  Politicians on both sides  are seeking to reassure nervous taxpayers and investors that they will take fast and decisive action to avoid massive tax hikes set to occur in January. However, Republicans and Democrats are far apart on how best to reduce the staggering US debt, and reaching a compromise promises to be a difficult task.
  • Middle East violence continues: There were strong indications that a ceasefire between Hamas and Israel would be announced on Tuesday, but this failed to materialize, despite the presence in the region of US Secretary of State Hillary Clinton and UN Secretary General Ban Ki-moon. Fighting between the warring sides continues to rage,  although talk of an imminent cease fire continues.  Israel has threatened to invade Gaza if necessary, but  a widening of the  conflict could easily spill out of control and lead to massive unrest in the volatile Middle East.  If the  violence worsens, we could see the  currency markets react sharply in response.
  • Separation anxiety grips Spain: With the markets focused on Greece, and  Madrid managing without a bailout for now, Spain has not been  on  the front  pages  lately. That could change next week, a the region of  Catalonia holds elections on November 25. The independence movement is enjoying growing support, as many Catalans are unhappy about propping up other regions while they are forced to make cuts and ask the central government for aid. However, the central government has balked at giving Catalonia more of a say in its finances, which has only served to fan the separatist flames. If the pro-independence parties win the upcoming election, we could see more unrest, which is the last thing the  country needs as it struggles with severe economic problems.

Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.