Euro dollar is now sliding to support as London reopens after a holiday. European banking troubles, Greek bailout issues and a softer tone from Trichet on inflation are the main reasons for this slump. The pair is still high. Important US data lies ahead.
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: A very quiet session saw the pair around 1.4520. The fall began afterwards.
- Current range 1.4480 to 1.4520.
- 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 sliding lower – click on the graph to enlarge.
EUR/USD Fundamentals
- 13:00 US S&P/CS Composite-20 HPI. Exp. -4.7%.
- 14:00 US CB Consumer Confidence. Exp. 52.1 points.
- 16:15 US FOMC member Narayana Kocherlakota talks. He voted against the recent move.
- 18:00 US FOMC Meeting Minutes. This will reveal the members’ opinions from the decision to pledge low rates until mid 2013. 3 members opposed.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Trichet acknowledges weakness: After not saying anything meaningful in Jackson Hole, the president of the ECB spoke in the European parliament and said that inflation risks are “under study”. The markets ignored it, until this was echoed by the Financial Times. Indeed, yesterday’s German CPI showed a surprising drop in prices. This goes hand in hand with weak growth and weak business sentiment in Germany and across the continent. Will Trichet cut the rates before his term ends?
- 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. Many EU officials played down Lagarde’s warning.
- 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. In addition, Spanish unions announce protests against the constitution change for a Spanish “debt ceiling”.
- 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, and today’s we’ll see what the members talked about in the last meeting.
- 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.
- ECB Sterilizes Bond Buying : The ECB continues keeping yields down. The ECB already spent above 40 billion euros in the current round of buying Italian and Spanish bonds in the past three weeks. It has managed to drain this money from the markets today. Sterilized actions are positive for the currency.
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