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Euro dollar  confirmed the break above strong resistance and now continues higher. The next line is still far. The pair still rides on optimism that the Greek deal will hold, despite worrying signs. Higher oil prices weigh on the greenback. If no bad news erupt, euro/dollar is going for its strongest close in 2012. Will this rally continue? Or are we getting a sell opportunity?

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

EUR/USD Technicals

  • Asian session: Quiet session see the pair under 1.3380, before moving higher towards 1.34 in the European session..
  • Current range:  1.3333 to 1.3450.EUR/USD Chart February 24 2012
  • Further levels in both directions: Below:   1.3333, 1.3280, 1.3212, 1.3145, 1.3060, 1.3060, 1.2945, 1.2873 and 1.2760.
  • Above:   1.3450, 1.3550, 1.3615, 1.37, 1.38 and 1.3950.
  •  1.3333 now switched into support, after the convincing break.
  • 1.3450 is the next resistance line, and there’s still room to reach it.

Euro/Dollar on high ground  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:00 German Final GDP. Exp. -0.2%. Actual -0.2%.
  • 14:55 US UoM  Consumer Sentiment (revision). Exp. 72.8 points.
  • 15:00 US New Home Sales. Exp. 316K.
  • 15:45 US FOMC member  John Williams speaks. Dovish tone expected.
  • 18:30 US FOMC  William Dudley speaks. Dovish tone expected as well.

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

EUR/USD Sentiment – Details of hurdles

  • Bond Swap ready to roll: Lawmakers in Athens approved to the bond swap, including the less voluntary CACs. This law means that if 66% of private bondholders agree to a haircut, it will be forced on the others. Due to the  insistence  of the IMF, the private sector haircut was raised to a nominal value of 53.5%, voluntarily of course. This means around 73% in real terms. Note that some hedge funds have an interest to trigger the Credit Default Swaps, as they will more money on a default. A special report about Greece is ready for you to download. Just join the newsletter and get the report.
  • Germany improving: Despite the contraction in Q4, Germany will likely escape recession. The recent IFO and ZEW figures were better than expected.
  • Subordination by the ECB: The European Central Bank already swapped its Greek bonds to ones that would be immune of the aforementioned CACs. This means that they have priority. This could trigger an official default by the rating agencies, triggering CDS.
  • IMF Contribution Only in Second Week of March: The International Monetary Fund, which is massive funding from the US, is expected to provide a much smaller contribution to the second bailout. This means that EU countries will have to contribute more. The decision will take place only in the second week of March.
  • Plan B still possible: Despite the deal, things, such as the IMF contribution or more Greek misses, could still go wrong. There are reports about plans made in Germany and the US for a  Greek bankruptcy on March 23rd, when Athens will raise a white flag and a bank holiday will be announced. Here are  5 more ominous signs that Greece is pushed to the corner.
  • ECB LTRO II: The first unlimited 3 year loans managed to stabilize the banking system and to create an incentive for banks to buy Italian and Spanish bonds. The second LTRO is due on February 29th and can attract even 1 trillion euros. The success of this operation can make European leaders feel safe and let go of Greece.
  • US Housing still sensitive:  The sensitive housing sector has shown minor improvement via the existing home sales figure  . Single family houses are still struggling, as well as foreclosures. The trend of falling jobless claims, at least in the 4 week moving average continued. Today we get another housing figure: new home sales.
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