EUR/USD Apr. 8 – Storming Higher on US Fears

EUR/USD is rallying quickly and nearing the next resistance level, as fears of a US government shutdown weaken the dollar across the board. Will it break this line or consolidate lower as the week ends? Here’s a quick update on technicals, fundamentals and community trends.

EUR/USD Technicals

• Asian session:  An unusual wild session saw Euro/Dollar climb from 1.43 to 1.44. A fresh move sent the pair even higher.
• Current range –  1.4282 – 1.4450

• Further levels in both directions: Below 1.4282, 1.4160, 1.4030, 1.3950, 1.3860, 1.3760
• Above:    1.4450, 1.4580, 1.48, 1.50.
• Support is only at 1.4282, the critical line that the pair battled with yesterday.
• Strong resistance is only at 1.4450, and it’s getting very close now. These levels weren’t seen for a very long time.

Euro/Dollar dropping to mid range  – click on the graph to enlarge.

EUR/USD Fundamentals –

• 6:00 German Trade Balance. Exp. 13.3 billion. Actual 11.4. Market disregarded this disappointment.
• 14:00 US  Wholesale Inventories. Exp. +1.1%
• 14:15 US FOMC member  Richard Fisher talks. Hawkishness expected.

* All times are GMT.

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

EUR/USD Sentiment

• US Government Shutdown: The main theme that dominates the markets now is a possibility that the US government will lack funding, as politicians in Washington haven’t reached a deal. There’s a low chance that this is a real crisis, as it happened before, but the market is now fascinated with this, and the dollar loses ground across the board.
• First rate hike in two years: Indeed, the European Central Bank made a move on the rates. Trichet raised the rate to 1.25% and hinted that another moves isn’t coming in the next meeting, but won’t be ruled out. The initial reaction was bad for the Euro,as the market expected him to be more hawkish and to hint more rate hikes.
• Bailout for Portugal – The details of a bailout for Portugal are starting to emerge, and there’s a lot of talk that Portugal will be the last country to receive a bailout. Indeed, Spanish yields are lower, meaning that the market is more confident about Spain. See more about The Portuguese bailout
• Fed becoming hawkish:  The FOMC Meeting Minutes have shown that the members of the Federal Reserve tend to end QE2 and even raise rates. This is in line with their  recent speeches.  Two members, Charles Plosser and Narayana Kocherlakota are talking about  raising  the rates. This dollar bullish tone was shattered by William Dudley, a senior member who was very worried about the economy.The hawks at the Fed still don’t match Trichet, but the tone is definitely shifting and helping the dollar. Also Ben Bernanke repeated the same cautious stance. It seems that the hawks are many, but the important people are doves. Today we get Richard Fisher, who is a known hawk.
• Greece is also in trouble: There are growing denials that Greece will default. More denials mean the situation isn’t good.

Currensee Community: 65% are long , 35% are short. These are 629  open positions in real accounts trading this pair at the moment.