Euro dollar is capped under higher resistance as the market awaits Monday – the day that the Greek deal is expected to kick start. The euro was cheered up by the preparations made by the ECB towards a bond swap in Greece. While its participation isn’t clear, it took steps to avoid being included in the PSI. US figures continue pointing to the upside, especially regarding employment. Today we’ll get information about the second mandate of the Fed: price stability. Will new headlines from Greece rock the euro before the weekend?
Here’s an update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: A relaxed session was seen after the break above the downtrend channel. 1.3145 caps the pair.
- Current range: 1.3060 to 1.3145.
- Further levels in both directions: Below: 1.3060, 1.3060, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2620.
- Above: 1.3145, 1.3212, 1.3280, 1.3333 and 1.3450.
- 1.2945 is the next support line. 1.30 is only a battle line.
- 1.3212 proved to be the decisive point that started the fall. It will be tested if 1.3145 is broken.
Euro/Dollar capped under resistance – click on the graph to enlarge.
EUR/USD Fundamentals
- 7:00 German PPI. Exp. +0.4%. Actual +0.6%.
- 9:00 Euro-zone Current Account. Exp. +2.2 billion.
- 13:30 US CPI. Exp. +0.3%. Core CPI exp. +0.3%.
- 15:00 US CB Leading Index. Exp. +0.6%.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Greek deal on Monday?: The war of words between Germany and Greece settled down. After the leading candidate to win Greek elections, Samaras, signed his commitment letter, and after Greece found more cuts to meet the demands by the troika, the sides are moving forward to cut the deal on Monday. Doubts now come from the IMF, which insists on Greek debt sustainability.
- ECB prepares: The European Central Bank swapped Greek bonds to ones that will not “participate” in a haircut – avoiding the Collective Action Clauses”. This is a preparation for the PSI and certainly a step forward. The ECB will probably help Greece by distributing profits as. Mario Draghi hinted and opened the door to a contribution by the ECB to the Greek bailout. But this is fully confirmed yet.
- Federal Reserve Not So Dovish: Contrary to Ben Bernanke’s dismissal of positive job figures and his sad face, the FOMC is a more balanced. It seems that QE3 has a low chance in March. This pushed the dollar higher after Bernanke pushed it lower in recent weeks.
- Milder recession: According to the initial release, the French economy surprised and continued growing. It’s important to note that Q3’s growth was revised tot he downside. And while Germany suffered contraction, a return to growth has good chances in Q1, so an official recession will likely be avoided. For the whole euro-zone, the contraction of 0.3% was better than expected.
- 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.
- More Positive US figures: Yet again, US jobless claims dropped to lower pre-crisis levels. The housing sector is more sensitive. Also the forward looking Philly index exceeded expectations, although its employment component was weaker than last month. The general picture of gradual improvement continue.
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