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Euro dollar  is ticking higher along the pivotal line in the day after Christmas. Most financial centers are closed, but movements are still seen on the charts. No events are expected today.

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

EUR/USD Technicals

  • Asian session: The pair moved up and reached the 1.3060 line.
  • Current range:  1.3060 to 1.3145.EUR/USD Chart December 26 2011
  • 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 – No Events today

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

EUR/USD Sentiment

  • Trade volume at extreme low: The day after Christmas is a holiday in most financial centers. Trading volume will rise tomorrow, but will likely stay low until January 3rd.
  • The day after the euro: Some financial institutions are already working on contingency plans for the day after the euro. Symbols such as ITL (Italian Lira), ESP (Spanish Peseta) and GRD (Greek Drachma) are revived in computer software systems, but there is no confirmation about printing the old money. There was one rumor about the Irish mints working on printing the Irish punt (IEP), but this was never confirmed.
  • 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 delayed  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. The publication of the report about euro-zone countries has been delayed to January.  If France loses the AAA rating, so does the EFSF bailout fund. Moody’s and Fitch also added their warnings.
  • 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.
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