EUR/USD Dec. 23 – Awaiting Last Christmas Gifts from

Euro dollar  is trading in a quite manner in the middle of the range, as markets are grinding down to a halt. A downgrade for France seems like a done deal, but it still hasn’t happened. Will S&P give a Christmas present to the French Republic? Just before the week ends, we have some important indicators from the US.

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

EUR/USD Technicals

• Asian session: Another quiet session sees more range trading.
• Current range:  1.3060 to 1.3145.

• Further levels in both directions: Below  1.3060, 1.30, 1.2945, 1.2920, 1.2873 , 1.2720 and 1.2580.
• Above:   1.3145, 1.3212, 1.3280, 1.3380, 1.3420,  1.3480 and 1.3550.
• 1.2945 is the trough reached after 1.30 was lost, but the really important support is the YTD low of 1.2873.
• 1.3145 remains critical resistance even though it was temporarily broken.

Euro/Dollar in the middle of the range- click on the graph to enlarge.

EUR/USD Fundamentals

• 13:30 US Durable Goods Orders. Exp. +2.2%. Core exp. +0.5%.
  
• 13:30 US  Personal Spending. Exp. +0.3%.
• 13:30 US Personal Income. Exp. +0.3%.
• 13:30 US  Core PCE Price Index. Exp. +0.1%.
• 15:00 US New Home Sales. Exp. 314K. See how to trade this event with GBP/USD.

* All times are GMT.

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

EUR/USD Sentiment

• Trade volume dropping: Christmas is just around the corner and volumes are lower, so it’s important to be cautious. Any small order can move the markets in thin air. London will close early today.
  
• US – Housing looks bad, employment looks good  : After building approvals and housing starts exceeded expectations,  existing home sales were low  and saw significant downwards revisions. This sector is critical for US growth. Also Q3 was worse than reported, with lower growth, only 1.8%. Another drop in jobless claims provides hope.
• France downgrade awaited  Standard and Poor’s  warned all euro-zone countries, apart from Greece, that their rating is endangered.  France, Italy, Spain and others received a two-notch warning.  The rating agency promised an answer within days and official talk from Paris begins preparing the public for a downgrade, saying “it’s not the end of the world” and similar comments.  If France loses the AAA rating, so does the EFSF bailout fund. Moody’s and Fitch also added their warnings. In the meantime, Hungary was downgraded to junk status.
• ECB Indirect QE: The European Central Bank conducted a massive 3 year financing operation (LTRO). Banks can pledge collateral, including of low grade and get financing. This could explain the huge success of Spain’s bond auction. Indirectly, the ECB encourages banks to buy sovereign bonds, and gives them a nice arbitrage. But after the huge €489 billion operation the pair then “sold the fact”. Italian 10 year yields are now close to 7%, and Spanish yields aren’t too close to 5% anymore. This shows the partial success of the operation.
• Greek talks stuck: Greece’s bondholders are struggling to reach an agreement about the “voluntary” debt restructuring. The parties aren’t getting close. And, the pace of withdrawals from Greek banks intensified recently, as the chances of leaving the euro-zone rose.  This Greek bank run  could bring down the system.