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Euro dollar  is slipping from the highs it reached late last week. The G-20 meeting in Mexico didn’t provide any immediate resolutions, and Europe was told to help itself first. The question of IMF funding for the Greek bailout remains open as the German parliament is expected to approve the deal with help of the opposition. One senior minister wants to see Greece out of the euro-zone. Greece officially launched the haircut and is waiting for volunteers.

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

EUR/USD Technicals

  • Asian session: Slow session sees the pair eventually slip lower, under 1.3430.
  • Current range:  1.3333 to 1.3486.EUR/USD Chart February 27 2012
  • Further levels in both directions: Below:   1.3430, 1.3333, 1.3280, 1.3212, 1.3145, 1.3060, 1.3060, 1.2945, 1.2873 and 1.2760.
  • Above:   1.3486, 1.3550, 1.3615, 1.37, 1.38 and 1.3950.
  •  1.3333 now switched into support, after the convincing break.
  • 1.3430 is minor resistance before the fresh peak of 1.3486.

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

EUR/USD Fundamentals

  • During the day: German vote on Greek bailout.
  • 9:00 Euro-zone  M3 Money Supply. Exp. 1.8%. Actual 2.5%. Is the ECB’s liquidity reaching the markets?
  • 15:00 US  Pending Home Sales. Exp. 1.1%. See how to trade this event with USD/JPY.

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

EUR/USD Sentiment – Details of hurdles

  • G-20 tells Europe to help itself: The G-20 summit discussed the necessary European firewall before international help. Germany didn’t like it as it would have to foot the bill. It votes on an unknown sum today.
  • German interior minister advises Greece to leave:  Hans-Peter  Friedrich told Der Spiegel that he would advise Greece to leave the euro-zone and said that Greece should be “made an offer it can’t refuse” to leave.
  • Germany votes on unknown sum: The German parliament votes on unknown sum as the IMF contribution isn’t known at the moment. With coalition members doubting the deal, Merkel might rely on the opposition. This deal may never see the light of day.
  • Bond Swap set for March 8th: Greece approved and officially launched an offer for a bond swap. Private bondholders will lose  53.5% in nominal terms, voluntarily of course. This means around 73% in real terms. A big majority is needed, for the non-volunteers to be swapped as well via the Collective Action Clauses. 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.
  • 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  even if all the volunteers are found.
  • 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.
  • Germany improving: Despite the contraction in Q4, Germany will likely escape recession. The  recent IFO  and ZEW figures were better than expected. With an unemployment rate of 5.5%, Germany is attracting immigrants and envy.
  • 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: pending home sales.
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