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Euro dollar  is trading in a low range after Trichet’s very limited actions in the markets. With global stock markets and commodities all facing the ground, there are little expectations from today’s all important US Non-Farm Payrolls. Will the euro dive under 1.40?  

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

EUR/USD Technicals

  • Asian session: An active session saw the pair find a bottom at 1.4050, and it managed to recover from there.
  • Current range 1.4070 to 1.4160.EUR USD Chart August 5 2011
  • Further levels in both directions: Below    1.4070, 1.4030, 1.3950, 1.3838, 1.37, 1.3440.
  • Above:   1.4160, 1.4220, 1.4282, 1.4325, 1.4375, 1.4450, 1.4550
  • 1.4160 switched its role to a fierce resistance line, after the break yesterday..
  • Note that significant support is above the round 1.40 line, at 1.4030, in case of another sharp drop.

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

EUR/USD Fundamentals

  • 7:00 Spanish Industrial Production. Actual -2%.
  • 8:00 Italian Industrial Production. Exp. +0.4%.
  • 9:00 Italian GDP. Exp. +0.2%.
  • 10:00  German Industrial Production. Exp. +0.1%.
  • 12:30 US Non-Farm Payrolls. Exp. +90K. See NFP Preview for details.
  • 12:30 US  Unemployment Rate. Exp. 9.2%.
  • 12:30 US  Average Hourly Earnings. Exp. +0.2%.
  • 19:00 US  Consumer Credit. Exp. 5 billion.

* All times are GMT.

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

EUR/USD Sentiment

  • Trichet hits the markets: The president of the ECB introduced liquidity measures and also acted in the markets, by buying bonds. But the actions were limited to Ireland and Portugal, and failed to restore confidence. Stock markets and commodity markets crashed, and the euro fell significantly.
  • Normal Non-Farm Payrolls?: While many US indicators are terrible, there is some hope that the “king of forex” will produce a positive result, that will provide some hope. This is based on employment components of PMIs, and also on other employment related numbers. The markets will rock on any result. Here are 5 scenarios for this event.
  • Japan intervenes:  One day after Switzerland, the Japanese authorities intervened in the markets in a more direct manner. USD/JPY jumped over 250 pips, and this had some effect on the euro as well. The Swiss measures had a limited effect. The Japanese move, uncoordinated with other countries, is likely to be limited as well, at least for EUR/USD.
  • Spanish and Italian troubles: Following Trichet’s inaction, yields are on the rise again, with Spanish ones at 6.35% and Italy’s at 6.28% – both are very close to record highs. The spread between benchmark German bunds and these ones is over 4%. A Spanish bond auction went through on Thursday. Yet again, Spain paid a high price for raising money.
  • US Downgrade?: The debt ceiling deal was enough to prevent a default, but in the long run, the US debt projections aren’t too good. The US is awaiting a credit rating downgrade, but only by some rating agencies. Here’s how it is likely to impact the greenback.