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Euro dollar  bounced off high resistance after the break higher yesterday. Political leaders in Greece made significant steps forward, and also the ECB may be willing to indirectly accept losses on Greek bonds, lowering the debt load on the Hellenic Republic. It seems that Germany counters this concession with a new idea to postpone the lion’s share of the Greek aid to keep the pressure high in Athens. It’s all Greece today as intensive talks in Athens continue.

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

EUR/USD Technicals

  • Asian session: A relaxed session after the break higher saw consolidation around 1.3250.
  • Current range:  1.3212 to 1.3280.EUR/USD Chart February 8 2012
  • Further levels in both directions: Below:  1.3212, 1.3145, 1.3060, 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623
  • Above: 1.3280, 1.3333 and 1.3450, 1.3550 and 1.3650.
  • 1.3280 seems tough for now, but 1.3450 is more serious.
  • 1.3212 turns into support after being broken.

Euro/Dollar in range- click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:00 German Trade Balance. Exp. 14.1 billion. Actual 13.9 billion.
  • 15:40 US FOMC member  John Williams speaks.

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

EUR/USD Sentiment

  • Progress in Athens:  Greek politicians made significant progress in agreeing to the new demands by the EU / ECB / IMF troika. A report about Greece is expected tomorrow. The second bailout is now projected to be finalized next week. This includes the PSI (A Greek haircut of now 70%). Greece has more than 14 billion euros of bond payments due on March 20th. Together with the grace period, March 27th is the final deadline. For a potential default of Greece (Grefault), the Greek PM asked for a report.
  • Postponement of Bailout: The Germans seem to have little faith in Greece. A new idea from Berlin says that Greece will not receive the lion’s share of the bailout, in order to keep up the pressure on Greece. This joins a former idea of placing the money in a special escrow account that will be used to pay bondholders. These tough measures probably come to mask the concessions regarding the ECB.
  • ECB closer to a  haircut:  The pressure for Official Sector Involvement probably succeeded. A new report in the WSJ says that the ECB will somehow unload the Greek debt to the EFSF, keep its balance sheet balanced, and perhaps that the EFSF will take a hit. Details are unclear, but progress has been made here. The Germans earlier insisted on keeping the ECB out of the barber shop. Note that ECB president  Draghi didn’t categorically reject this. If Greece defaults, the ECB will have a 100% involuntary haircut.
  • 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 continues hurting the dollar:  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.