Euro dollar is sliding a bit lower after another late night Greek drama. The level of distrust in Brussels is high: Greece is expected to pass tough austerity and commit to the terms also after the elections before getting any aid. At least the ECB has shown more flexibility to provide some help to Greece, in a smart move by Draghi. Important US figures and a speech by Bernanke close the week. Who will set the tone for the week’s end? Greek troubles or Bernanke’s softness?
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session: A more quiet session saw the pair weakening gradually.
- Current range: 1.3212 to 1.3280.
- Further levels in both directions: Below: 1.3212, 1.3145, 1.3060, 1.30, 1.2945 and 1.2873.
- Above: 1.3280, 1.3333, 1.3450, 1.3550 and 1.3650.
- 1.3280 remains a battle line.
- 1.3212 strengthens its position as support. This is a distinct line.
Euro/Dollar struggling on high ground- click on the graph to enlarge.
- 7:00 German Final CPI. Exp. -0.4%. Actual -0.4%.
- 7:45 French Industrial Production. Exp. -0.8%. Actual -1.4%. Also Germany’s output was soft.
- 13:30 US Trade Balance. Exp. -48.1 billion.
- 14:55 US Consumer Sentiment (first release). Exp. 74.4 points. See how to trade this event with EUR/USD.
- 17:30 US Federal Reserve Chairman Ben Bernanke talks.
- 17:50 US FOMC member Sandra Pianalto talks.
- 19:00 US Federal Budget Balance. Exp. -58.5 billion.
For more events later in the week, see the Euro to dollar forecast
- Distrust in Brussels: Greek politicians thought they made big progress, but other EU members show a lot of distrust. Greece needs to fix the last hole in the budget and pass harsh legislation before they get the long awaited PSI haircut and the second bailout program. If everything goes well, things should be finalized by next Wednesday. But things usually don’t go well..
- Troubles in Athens: As everybody knows, harsh austerity didn’t work for Greece so far. Apart from missing budget deficits, Greece saw unemployment climb above 20%, tax revenue plunge (also in January 2012) and opposition anti-austerity parties gaining traction. Even if the current coalition take serious commitment, a totally new government could replace it. Protests continue in Athens.
- No rate cut in the euro-zone: As expected, Mario Draghi left the interest rate unchanged at 1%. In a very confident performance in the press conference, Draghi seemed to be on top of everything, and even showed flexibility:
- ECB opens door to haircut: The pressure for Official Sector Involvement succeeded. Mario Draghi made a “one more thing” last moment Steve Jobs style statement and opened the door to a contribution by the ECB to the Greek bailout. But this depends on politicians first.
- Portugal awaits Greece: Portuguese yields remain on high ground. The path chosen for Greece will likely be followed by the small Iberian country in the infamous “contagion” effect that is feared.
- Bernanke dismisses job growth: The drop of the unemployment rate to 8.3% and the gain of 243K jobs in January gave a lot of hope for the US. Nevertheless, in a testimony in Washington, Ben Bernanke dismissed the positive figure. He mentioned the employment-to-population ratio and said that 8.3% understates the real state of unemployment, which he sees as quite gloomy. So, QE3 still has a chance in March, even if quite low. Jobless claims fell once again to 358K, but in another speech today, Bernanke will likely continue his soft stance.