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Euro dollar  kicked off the week with a move above the range and reached a one month high. This was short lived, and the pair is back in range. European worries are growing in two fronts: the stability of the European banking system and the passage of the new powers for the bailout funds are in doubt. Will it make another attempt to break higher? Or fall from here?

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

EUR/USD Technicals

  • Asian session: A quiet session ended with a breakout attempt that touched 1.4550 before retreating quickly to 1.45.
  • Current range 1.4480 to 1.4520.EUR USD Chart  August 29 2011
  • Further levels in both directions: Below 1.4480, 1.44, 1.4330, 1.4282, 1.4220, 1.4160, 1.4070, 1.4030.
  • Above:  1.4520, 1.4550, 1.4650, 1.47, 1.4775, 1.4882, 1.4940
  • The current tight range means that another sharp move is feasible. To which direction?
  • 1.4282 is significant support on the downside.

Euro/Dollar failed breakout attempt  – click on the graph to enlarge.

EUR/USD Fundamentals

  • German CPI. Exp. 0%.
  • 12:30 US  Personal Spending. Exp. +0.5%.
  • 12:30 US  Personal Income. Exp. +0.3%.
  • 12:30 US  Core PCE Price Index. Exp. +0.2%.
  • 13:00 ECB president Jean-Claude Trichet talks. He didn’t say anything meaningful in Jackson Hole.
  • 14:00 US  Pending Home Sales. Exp. -0.8%.

* All times are GMT.

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

EUR/USD Sentiment

  • What did Bernanke say?  In his long awaited speech in Jackson Hole, the chairman of the Federal Reserve only said that new tools will be examined in the longer FOMC meeting on September 20-21. QE3 was not presented. Speculations remain.
  • European banks are fragile: Voices have been louder over the troubles of European banks. IMF managing director Christine Lagarde warned that we are in a dangerous phase and that mandatory recapitalization is needed. There are reports that EU officials are already working on “radical plans”. See more about the Dark Clouds Over Europe’s Banks.
  • Greek bailout questioned: In addition to the stubborn Finnish demand for collateral, opposition is mounting in Slovakia, Germany and Italy to the new bailouts and to their effectiveness. It not only endangers the next tranche of aid to Greece, but also undermines the whole bailout mechanism.
  • Weak US: American growth was revised to the downside once again. Some people are convinced that the US is already in recession. On Friday we have the all-important Non-Farm Payrolls, to get an updated view on the state of the US economy.
  • Sentiment lower in Germany: Both the usually optimistic IFO and the usually pessimistic ZEW indices showed growing worries in Europe’s powerhouse.
  • ECB  Sterilizes Bond Buying  :  The  ECB continues keeping yields down. The ECB already spent above 26 billion euros in the current round of buying Italian and Spanish bonds. It has managed to drain this money from the markets today. Sterilized actions are positive for the currency.
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