EUR/USD stabilized at the wake of the new week, consolidating the drops it experienced last week and even gaining a bit. No dramatic news awaited the pair over the weekend. The nomination of Paul Ryan as Romney’s running mate hasn’t made an impact. Things are expected to warm up later in the week, with GDP figures, a Greek bond auction to avoid default and significant US news.
Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.
- Asian session: Euro/dollar traded around 1.2288 and didn’t go very far.
- Current range: 1.2288 to 1.2330.
- Below: 1.2288, 1.22, 1.2144, 1.2043, 1.20, 1.1876 and 1.17.
- Above: 1.2330, 1.2360, 1.24, 1.2440, 1.2520, 1.2623, 1.2670, 1.2743 and 1.2814.
- 1.2330 is strong resistance.
- The break under 1.228 is still not confirmed. If it will be, the pair has a lot of room to fall.
Euro/Dollar stabilizes – click on the graph to enlarge.
- 6:00 German WPI. Exp. 0%. Actual +0.3%.
- Greek revolving doors: The EU / ECB / IMF delegation left Athens and said they were making progress in their negotiations with the Greek government. Talks are not scheduled to resume until September, after Greece has a scheduled bond repayment to the ECB. Greece is expected to raise the money in the markets tomorrow (Tuesday) with the help of the ECB, in order to repay the ECB. That’s how things work now. The head of the Eurogroup, Jean-Claude Juncker, said that he doesn’t foresee a Grexit “at least until the end of the autumn. Also former ECB chief economist hinted about a euro exit. Greece reported a year over year contraction of “only” 6.2% in Q2, better than 6.5% in Q1. See how to trade the Grexit with EUR/USD.
- ECB doing some juggling:: In its Monthly Bulletin, the ECB revised its forecast of Euro-zone growth in 2012 from -0.2% to -0.3%, We will get initial GDP figures from Germany tomorrow. This negative news will increase the pressure on ECB head Mario Draghi to take action, especially regarding Italian and Spanish borrowing costs. Draghi recently declared that bond yields are unacceptable, and that the ECB will explore ways to act in the coming weeks. Italy and Spain want help, but don’t want more conditions and hesitate before asking for help. In Germany, opposition is growing for ECB intervention from Bundesbank figures. The reminder of bond buying by the Bundesbank in the 70s was seen as “blackmail” by the German orthodox bankers. Draghi is juggling between the Spanish and Italian desire and the German opposition.
- QE3 debate continues, : Talk about QE3 or no QE3 continues after, Boston Federal Reserve President Eric Rosengren declared that the Fed should implement QE3 in order to help the troubled US economy. In the meantime, encouraging signs were seen in the US: apart from the positive NFP, jobless claims remain low and the trade balance deficit fell to lows last seen at the beginning of 2011. Other market players, however, believe that the QE3 camp seems to miss a simple reality.
- German numbers alarm markets: Recent German economic data has been weak, with PMIs, industrial production and manufacturing orders all disappointing the markets. The markets are getting jittery, as a Germany in decline could spell disaster for the struggling Euro-zone and send the euro tumbling. Just to add oil to the fire. Apart from the GDP figures, also the important ZEW indicator is awaited. Germany is not immune.
- Spanish regions complicate bailout picture: The euro-zone’s fourth largest economy is trying to focus the crisis on the banks, but its regions are also in deep trouble. No less than 6 regions may ask to tap into the national bailout fund. National sentiment is strongly felt in Catalonia, which banned a budget meeting. The regions are part of the complex picture. With no immediate action, Spanish yields are creeping back up.
- Debt woes, recession weigh on Italy: The area’s third largest economy also sees yields rising. The economic picture in Italy is grim, as the country is carrying a debt-to-GDP ratio of 123%, and with another GDP decline, has officially been in recession for one full year. The Italian PM Mario Monti has been very active of late, but his popularity in Italy is diminishing, and he also managed to anger the Germans by dismissing the importance of the Bundestag.