EUR/USD Dec. 28 – Shrugs Off Successful Italian Auction

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Euro dollar is trading in even narrower ranges, despite the rise in trading volume. A successful Italian auction provides some support, as well as the tensions around Iran. Have we seen all the movements for this year?

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

EUR/USD Technicals

  • Asian session: Another quiet session saw very slow moves around the 1.3060 line.
  • Current range:  1.3060 to 1.3145.EUR/USD Chart December 28 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 remains range bound around the pivotal line- 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

  • Italy’s successful auction: The euro-zone’s third largest country had a 6 month bond auction worth 9 billion euros. The yield dropped from 6.5% to 3.25%. This impressive drop helped 10 year bonds: the yield dropped from around7% to 6.75%.  This could be thanks to the massive loan from the ECB, although this operation didn’t yield the expected results. Spanish bonds also drop to 5.09%, despite weak Christmas shopping.
  • Tensions rise around Iran: A recent law moving through the US congress aggravates Iran, which repeats its threat to close the Straights of Hormuz. These tensions send the price of oil up, and this weighs on the US dollar. Note that Mid-East violence could erupt in Syria, Lebanon and Israel rather than the Persian Gulf.
  • Oversold conditions: For a second week in a row, CFTC data showed that the number of net short contracts is at extreme levels. When everybody is short, there’s no one left to sell. This could change in the next days.
  • Trade volume still low: All financial centers are now open, but many participants are still on vacation. Volume will  likely stay low until January 3rd.
  • 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. Also home prices haven’t reached the bottom, with a big fall. This sector is critical for US growth.  Another drop in jobless claims provides hope and so does a rise in consumer confidence.
  • 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.
  • 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.
  • 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.
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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.