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Euro dollar  enjoyed strong figures from Germany’s IFO institute and managed to break above the line it failed to breach yesterday. Without any major US releases today, the focus remains on Europe: Spain and Italy’s high bond yields and Greek issues. Greece’s banks will report the first results after the huge losses imposed by the PSI and today is also the due date for the PSI on foreign law bonds, after many delays. Will the pair present stronger moves on the last day of the week?.

Here’s an update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: The pair muddled through in range, capped by 1.3165. The break came in the European session.
  • Current  range: 1.3165 to 1.3212.  EUR/USD Chart April 20 2012
  • Further levels in both directions: Below: 1.3165, 1.3110, 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623.
  • Above: 1.3212, 1.33, 1.3360, 1.3437, 1.3486 and 1.3550.
  • Uptrend support continues holding on after a temporary breach at the beginning of the week – a breach that also saw a temporary dip under 1.30.
  • 1.3212 is now within reach, after the break of 1.3165.
  • 1.3050 is strong support below.

Euro/Dollar moving higher on good German data – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00  German PPI. Exp. +0.5%. Actual +0.6%.
  • 8:00  German Ifo Business Climate. Exp. 109.6 points. Actual 109.9. Also accompanying figures were better than expected. This sent the euro above resistance.
  • 12:30 IMF Managing Director Christine Lagarde talks.
  • 14:30 Greek banks report results.
  • Towards end of day: PSI deadline for Greek foreign law bonds.

For more events later in the week, see the  Euro to dollar forecast

EUR/USD Sentiment

  • Do Greek banks need aid?: The deadline for publishing reports was delayed for Greek banks due to the huge PSI deal. The reports, published after the Athens stock exchange closes, will be closely watched. Losing over 70% on their own government’s bonds could certainly inflict damage to their balance sheets. 25 billion euros of EFSF money was already transferred this week to Greece. Will it need more for the banks? The publication will impact the euro.
  • PSI Leftovers: A small portion of Greek bonds were issued outside Greece, and therefore was immune to the Collective Action Clauses – losses could not be imposed on bondholders, like they were in local bonds.. The government in Athens delayed the deadline for the PSI over and over again as there were many holdouts and not enough “volunteers”. If bondholders insist, the dilemma will be between defaulting and triggering more worries for other countries, or paying out and having to cut more in the beaten budgets. Perhaps more bondholders were convinced to “volunteer”.
  • Which Direction for the Euro?:  Trading the Euro is becoming a daunting task, and volumes remain low, as traders struggle to find a clear direction for the continental currency.  Adding to the uncertainty is the fact that  there don’t  seem to be any fundamental developments to explain the curreny’s movements.  Despite  successful auctions in Belgium, Greece and Spain, the euro can’t seem to make up its mind as it bounces up and down.
  • Mediocre Bond Auction for Spain: Europe’s fourth largest economy managed to raise enough money, also for long term bonds, but paid a higher price. Yields remain around 6%, and this cannot last too long. The markets still follow the budget talks in Spain, now focusing on two regions:  Andalusia  and Catalonia.
  • US Economy Showing Worrying Signs: After some good retail sales figures, Thursday wasn’t too good. Existing home sales and the Philly Index dropped. More worrying were the jobless claims, that remained at elevated levels. The slowdown in unemployment cannot be easily dismissed as a one time event.
  • Chinese Downturn?: After posting a weak growth rate last week, China’s economic indicators continue to be a source of concern for the markets. The move to expand the yuan’s band is also seen as supportive for the Chinese economy, that requires this support.