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EUR/USD is awaiting “The Bernank” after falling on somewhat dovish comments from the president of the ECB, Jean-Claude Trichet. How will it act from here?  Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session:  Very active session sees the pair fall and even temporarily dip below 1.45 before making an impressive recovery in the Asian session.
  • Current range –  1.4520 – 1.4580

EUR USD Chart April 27

  • Further levels in both directions: Below 1.4580, 1.4520, 1.4450, 1.4375, 1.4282, 1.4160, 1.4030, 1.3950, 1.3860, 1.3760. 1.37, 1.3440.
  • Above:   1.4650,  1.47, 1.48, 1.5020, 1.5144
  • Serious resistance is only at 1.47, after previous lines have been left behind, but its noticeable that the pair stopped at 1.4650 – this could be a point of struggle later on.
  • 1.4580 is only minor support, with 1.4520 being much stronger, switching sides from resistance to support.

Euro/Dollar trading quietly higher  – click on the graph to enlarge.

EUR/USD Fundamentals

  • German CPI. Exp. +0.2%. Early signs from some of the German states show it will be above expectations.
  • 6:00  German Consumer Climate. Exp. 5.9. Actual 5.7 – small disappointment.
  • 9:00 European  Industrial New Orders. Exp. +1.3%.
  • 12:30 US  Durable Goods Orders. Exp. 2.1%. Core orders exp. +1.7%. – Usually an important event – is overshadowed today by Bernanke.
  • 16:30 Rate decision with FOMC Statement
  • 18:15 Ben Bernanke’s first ever  post-rate press conference.

For more events later in the week, see the  EUR/USD forecast

EUR/USD Sentiment

  • Tension towards Bernanke: Tension is mounting towards this historic event. Apart from the significance of Bernanke’s public appearance, the big question on the table is the continuation of the QE2 program which is due to end at the end of June. A clear message about its end will boost the dollar, talk about continuing it will have the opposite. And there’s lots of middle ground.. See the  FOMC preview for full details.
  • Merkel prepares public for Greek default: The Europe’s powerhouse begins  acknowledging there’s no option to avoid restructuring – she sent her senior aide to test this option. This happens as the Greek budget deficit soared above expectations, and there’s no one in the market to buy Greek paper.
  • Tension in the Middle East: In the Egyptian Sinai peninsula, the pipeline leading gas to Israel was sabotaged for the second time in 3 months. This stops the delivery of gas from Egypt to Israel and raises tensions. In Syria, a strategic country in the region, the army has been fully mobilized to depress the uprisings in Deraa, Jabla and other cities with Iranian aid. No one knows how this bloodshed will end. In Libya, the war continues and pushes oil higher.  Higher oil means a weaker dollar. Also Yemen, Bahrain and even Morocco are witnessing protests.
  • US Fiscal worries: It’s not Greece. It’s the US. The government is about to reach the $14.3 trillion debt ceiling on May 16th (according to recent calculations). The Republicans in Congress refuse to raise the debt ceiling if their demands aren’t met. The consequences could be a default of the US on its debt payment. The chances are very slim, but this talk is gaining traction and weakens the dollar. Needless to say, a default of the US will not only end the recovery but also send the whole world into turmoil.
  • Bailout for Portugal – Portuguese yields are high in the sky, at 9.6%, and reflect the trouble the country is in. The lack of support from the upcoming Finnish government and without  an operating  government in Lisbon, there’s less hope that this bailout will indeed happen. Perhaps Portugal will also default. Ireland could follow suit.

FXCM Speculative Sentiment Index shows that 72% of traders are short, more than yesterday. According to this contrarian index, this shows more gains for EUR/USD.

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