EUR/USD started the week with a small move to the upside, but is not going very far. European finance ministers are meeting and one of the topics is Greece. Unsurprisingly, the country is facing another financing gap despite reaching a primary surplus. Angela Merkel’s coalition is facing some issues. In the meantime, the USD is sliding ahead of a bank holiday.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USD started the week by climbing above 1.37, but it isn’t going too far.
Current range: 1.3650 to 1.37
Further levels in both directions:
- Below: 1.3650, 1.3580, 1.3515, 1.3450, 1.34, 1.3320, 1.3295, 1.3175, 1.31 and 1.3050.
- Above: 1.37, 1.38, 13915 and 1.40.
- 1.3650 has switched to support as the euro moves higher. 1.3580 follows.
- The round number of 1.37 now weakening. 1.38 is stronger.
EUR/USD Fundamentals
- Only the Eurogroup meetings are held today.
- The US is on a bank holiday due to Presidents’ Day.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Greek debt relief discussion to be postponed: The Eurogroup is expected to decide on sending the troika delegation to Greece once again, to try and resolve the financing gap. However, a decision about new debt relief will await for late April. In the meantime, Greek PM Samaras stated that his country reached a primary surplus (balance without debt payments) of 1.5 billion euros in 2013. The Eurogroup meeting might result in quite a few headlines.
- Euro-zone growth beats expectations: Figures from both core countries and especially from Germany beat analysts’ expectations. While the EZ recovery still looks fragile, the German strength seems to lead the euro-zone forward, and France isn’t pulling it back anymore. The fragility of the recovery looks weaker.
- Talking down the euro: The head of the Eurogroup, Dutch finance minister, Joeren Dijsselbloem, said that that some say the value is too strong. His words join an ECB member that stated that the central bank is considering negative rates very seriously. These words weighed on the euro, which has since recovered. In addition, the Bank’s monthly bulletin cut inflation forecasts from 1.5% to 1.1% in 2014. Draghi seemed confident that things will sort themselves out, but another fall in inflation could still trigger a move in March.
- Merkel coalition issues: The third government of Angela Merkel is only two months old, and it is already under strain. A scandal that involves both Merkel’s CDU/CSU and the SPD partner might reach the SPD leader Sigmar Gabriel and weigh on the coalition. So far, the agriculture minister from her party resigned and he may have been scapegoated in order to save the coalition. Merkel will meet coalition leaders on Tuesday to calm the situation.
- Weak US data: Retail sales fell in both January and December, lowering growth forecasts for both quarters. Bad weather was easily blamed, but perhaps the effect of the weather not that temporary (another storm hits the US) and perhaps the weakness is not only weather related. Convincing US figures are still missing.
- Yellen says tapers to continue: Testifying before Congress on Tuesday, new Fed chair Janet Yellen didn’t generate much excitement in the markets. She said that the Fed plans to continue trimming QE, provided that the employment picture continues to improve and inflation rises. She acknowledged that even though the unemployment rate has improved steadily, the recovery in the labor market is far from complete and the Fed plans to keep interest rates at ultra-low levels. QE seems to be on track despite the weakness in recent US data. The Fed took its time with the taper decision and a terrible disappointment is needed in order to derail the taper train. The upcoming NFP will be closely watched.
More: Analysis: ECB expects the situation to sort itself out, but things could still worsen
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