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Euro dollar  is stuck in range, drifting between hopes for QE3 in the US and worries about the European debt crisis. As summer ends, volume and volatility are expected to pick up. We have important US data later on.

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 in a narrow range. Nothing to get excited about.
  • Current range 1.44 to 1.4480.EUR USD Chart August 31 2011
  • Further levels in both directions: Below  1.44, 1.4330, 1.4282, 1.4220, 1.4160, 1.4070, 1.4030.
  • Above:  1.4480, 1.4520, 1.4550, 1.4650, 1.47, 1.4775, 1.4882, 1.4940
  • 1.4480 returned to be resistance, after the fall yesterday.
  • 1.4282 is significant support on the downside.

Euro/Dollar sliding lower  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00  German Retail Sales. Exp. -1.5%. Actual 0%.
  • 7:55  German Unemployment Change. Exp. -10K. Actual -8K.
  • 9:00 European CPI Flash Estimate. Exp. 2.5%. Actual 2.5%. Very stable.
  • 9:00 European  Unemployment Rate. Exp. 9.9%. Actual 10%.
  • 11:30 US  Challenger Job Cuts.
  • 12:15. ADP Non-Farm Payrolls. Exp.  102K. See how to trade this event with USD/JPY.
  • 13:45 US  Chicago PMI. Exp. 54.3 points.
  • 14:00 US  Factory Orders. Exp. +1.8%.

* All times are GMT.

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

EUR/USD Sentiment

  • FOMC Minutes somewhat dovish: The meeting minutes from the recent rate decision have shown that the central bank leans towards more easing, but not necessarily more QE. This comes despite three dissenters in the decision to keep rates low until 2013.
  • European banks are fragile: 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, but worries remain,such as this creative accounting.
  • Trichet acknowledges weakness: The president of the  ECB spoke in the European parliament and said that inflation risks are “under study”. The markets ignored it at first, and later responded. 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. On the other hand, the Flash estimate still shows that the pace is at 2.5%.  Will Trichet cut the rates before his term ends?
  • Greek bailout questioned: If Finland gets what it wants – collateral from Greece, it might trigger the “negative pledge clause”, and make the default officials. Plus a possible credit event. Germany and France are pushing Finland to retreat.
  • 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. Today we have an important hint towards this release: The ADP report for the private sector.
  • 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. Sterilized actions are positive for the currency. If this money isn’t drained – it’s QE.
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