Euro dollar tried to reach the 1.30 line but is now retracing the rise and dropping. A third day of talks in Greece yield talk about progress to avert a default in March, yet no deal is done yet. Positive US figures also supported the risk environment, with more coming to close the week. Will the euro close on high ground? Or are we set for another falling Friday?
Here’s an update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: EUR/USD consolidated on high ground above the 1.2945 line. The fall began in the European session.
- Current range: 1.2873 to 1.2945.
- Further levels in both directions: Below 1.2873, 1.2760, 1.2660, 1.2623, 1.2580, 1.2520, 1.24, 1.2330 and 1.2144.
- Above: 1.2945, 1.30, .13060, 1.3145, 1.3212 and 1.3280.
- The break above 1.2945 didn’t last too long, and 1.30 was approached only from afar.
- 1.2873 switches into strong support.
Euro/Dollar in low ground- click on the graph to enlarge.
EUR/USD Fundamentals
- 7:00 German PPI. Exp. +0.1%. Actual -0.4%..
- 15:00 US Existing Home Sales. Exp. 4.65 million.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Greek Hope: According to fresh reports, a deal between bondholders and Greece regarding a haircut is moving forward, after talks broke down last Friday. On the other hand, a report about Greek banks showed a shortfall of 15 billion euros, worse than estimated. These events aren’t fully priced in.
- US unemployment drops: The number of jobless claims dropped to 352K, the lowest in almost 4 years. In addition, the employment component of the Philly Fed Index shined. Is America on the right path?
- Spain getting away from trouble: The euro-zone’s fourth largest country enjoyed yet another great bond auction that yielded more money than expected, and at lower yields. In addition, the new government is moving forward to tackle trouble in the autonomous regions and banks.
- Chinese continued weakness: The Chinese manufacturing sector continues contracting, according to a fresh report by HSBC. This cools the optimism seen by the strong GDP numbers over there. The Chinese front will be quiet next week, as the country celebrates the new year.
- IMF Hope fades: The International Monetary Fund might receive an increase of its funds to help Greece and other countries. This helped the markets, even though the chances of this happening are low. The US is reluctant to provide more funds and it’s unclear if something will really emerge.
- Portugal deteriorates: The biggest victim of the multiple S&P downgrades is Portugal, which saw its yields leap. The chances of a default there are rising. The bond auction today will be closely watched. The downgrade of the bailout fund (EFSF) hasn’t hurt its bond auction. Also France, which got the historic downgrade, survived it quite well.
- ECB sees stabilization: The ECB bulletin and Mario Draghi expressed “tentative signs of stabilization” in the euro-zone.
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