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Euro dollar  is trading low on multiple European issues before the highly anticipated US Non-Farm Payrolls are published. Euro-zone indicators don’t help the euro, to say the least. The credit rating downgrade for France may happen today. Banks across the continent are struggling with cash, with the focus currently on Italy’s Unicredit. The first week of 2012 has already proved very eventful and it is expected to end with a blast.

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

EUR/USD Technicals

  • Asian session: The pair consolidated the huge losses seen earlier, in 16 month lows, after the French auction.
  • Current range:  1.2750 to 1.2873.EUR/USD Chart January 6 2012
  • Further levels in both directions: Below   1.2760, 1.2720, 1.2650, 1.2580 and 1.24.
  • Above:   1.2873, 1.2945, 1.30, .13060, 1.3145, 1.3212 and 1.3280.
  • 1.2760 is the new low, yet stronger support is at 1.2720.
  • After the big break, 1.2873 turned into resistance, and it isn’t too close.

Euro/Dollar losing New Year gains- click on the graph to enlarge.

EUR/USD Fundamentals

  • 10:00 Euro0-zone  Retail Sales. Exp. -0.2%.  Actual -0.8%.
  • 10:00 Euro-zone  Unemployment Rate. Exp. 10.3%. Actual 10.3%.
  • 11:00  German Factory Orders. Exp. -1.6%. Actual -4.8%. Bitter disappointment, yet this is a volatile indicator.
  • 13:30 US Non-Farm Payrolls. Exp. 150K.
  • 13:30 US Unemployment Rate. Exp. 8.7%.
  • 13:30 US  Average Hourly Earnings. Exp. +0.2%.
  • 14:00 US FOMC member William Dudley talks.
  • 17:40 US FOMC member Elizabeth Duke talks.
  • 18:00 US FOMC member  Sarah Bloom Raskin talks.

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

EUR/USD Sentiment

  • France and EFSF have successful auctions before potential downgrade: The euro-zone’s second largest economy had a nice bond auction. Nevertheless, this wasn’t enough to stop the drop of the euro. The EFSF bailout fund also had a successful auction. The perfect AAA credit rating of . France might lose two notches.
  • High expectations for NFP: After a very strong ADP figure, +325K, a good employment component in the manufacturing PMI and another drop in the jobless claims, expectations are high for the NFP. There are rumors about a very strong number. The one thing that weighs on the figure is contraction in the employment component of the services sector.
  • Unicredit under pressure: The large Italian bank paid a dear price for raising money. It isn’t the only bank at risk.  After Germany’s second largest bank, Commerzbank, saw rumors of nationalization, there are now rumors about No 1. – Deutsche Bank. The core of the core cannot fully avoid the debt crisis, and its banks are no different. Germany had a mediocre bond auction yesterday.
  • Spain might need help for banks: After acknowledging that the deficit for 2011 is closer to 8% than 6%, there are reports that the new government might ask for help from the IMF or the EU to help its banks. Spanish banks are thought to overvalue real estate property values.
  • Italy doesn’t want help: The technocrat PM Mario Monti said that approaching the IMF would be bad for the euro-zone’s third largest country. The echoes from a bad bond auction in which Italy  paid high prices once again  are still heard. 10 year yields are under 7%.
  • Iran challenges the US: The Islamic Republic warned the US that passing an aircraft carrier through the Straights of Hormuz might trigger action. This supports oil prices and this weighs on the US dollar.
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