EUR/USD Aug 12 – Ignoring French News, Steady in Range

Euro dollar  is very steady in range, ignoring a poor GDP read from France, which joins previous weakness from Europe’s second largest economy. Also the drop in EMU industrial output in choppy trading. We have a busy US schedule to wrap up the week. How will this volatile week end?

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

EUR/USD Technicals

• Asian session: A quiet session for a change, within the 1.4160 to 1.4220 range. Upwards move came in the European session, and is very limited.
• Current range 1.4220 to 1.4282

• Further levels in both directions: Below   1.4220, 1.4160, 1.4070, 1.4030, 1.3950, 1.3838.
• Above:   1.4282, 1.4375, 1.4450, 1.4550, 1.4650, 1.47.
• 1.4220 is only weak support. 1.4160 is more important.
• The 1.4282 switches positions once again to resistance. It is weaker now than beforehand.

Euro/Dollar steady in range  – click on the graph to enlarge.

EUR/USD Fundamentals

• 5:30 French GDP. Exp. +0.3%. Actual 0%.
• 5:30 French CPI. Exp. -0.2%. Actual -0.4%.
• 6:45 French  Non-Farm Payrolls. Exp. +0.2%. Actual +0.4$.
• 9:00 European  Industrial Production. Exp. +0.1%. Actual -0.7%. Yet another disappointment.
• 12:30 US  Retail Sales. Exp. +0.4%. Core sales exp. +0.2%.
• 13:55 US Consumer Sentiment. Exp. 63.2 points.
• 14:00 US  Business Inventories. Exp. +0.6%.
• 14:00 US FOMC member William Dudley talks. Dovish tone expected.

* All times are GMT.

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

EUR/USD Sentiment

• French Weakness: The French economy didn’t grow in Q2. This is disappointing, and joins other turmoil  surrounding the French Republic this week. It began with a rumor about France losing its AAA rating, continued with a rumor about Societe Generale going under, and continued with a report that an Asian bank cut credit lines to French banks. As a response to market volatility, France and other European countries banned short selling for two weeks. Will this help? Or will this trigger selling the stocks instead of selling shorts?
• Trichet continues guarding periphery bonds: The  ECB finally provided the necessary intervention in the markets, following an emergency meeting on Sunday. This one is serious – Spanish bond yields are flirting with 9 month lows. Trichet said that the ECB is active in the markets and it sure is. This stabilizes the euro and the fear of contagion.  . For more on this see:  QE Landing in Europe – Euro headed south?
• Bernanke uses verbal tools: As expected, the FOMC left rates unchanged and did not provide any hints about QE3, although some await the Jackson Hole Symposium on August 26 for this. What it did do is pledge to leave interest rates low until mid 2013, despite 3 dissenters. The picture that the committee painted for the US economy was quite gloomy. Stock markets are reacting in a very volatile manner..
• S&P Downgrade of the US: This historic move by S&P caused stock market sell offs, but these were followed by rallies. All in all, this seems to be behind us:  treasury yields just continued lower – a clear vote of confidence.  .
• US Job Market:  After the positive Non-Farm Payrolls report on Friday, the weekly unemployment claims provided another positive sign, by falling to 395K, the lowest since April.