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Euro dollar  recovers from the blows at the wake of the new week after digging to lower ground. The IMF sees more aid needed for Greece, and begins accepting the higher probability of default. Italy remains under pressure, as Angela Merkel and Nicolas Sarkozy discuss future plans and not current, burning, affairs. Is this move just another opportunity to sell, or will we see some serious consolidation?

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

EUR/USD Technicals

  • Asian session: A very active session saw the pair dig lower with a Sunday gap and reach a low of 1.2663. The recovery began in the European session.
  • Current range:  1.2760 – 1.2873EUR/USD Chart January 9 2012
  • Further levels in both directions: Below   1.2760, 1.2663, 1.2580, 1.2520 and 1.24.
  • Above:   1.2873, 1.2945, 1.30, .13060, 1.3145, 1.3212 and 1.3280.
  • The break above 1.2760 isn’t confirmed yet. 1.2873 is much more serious resistance.
  • The big level below is 1.2587, and other levels are more minor.

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

EUR/USD Fundamentals

  • 7:00  German Trade Balance. Exp. 12.3 billion. Actual 15.1 billion.
  • 9:30  Sentix Investor Confidence. Exp. -23.8. Actual -21.1 points.
  • 11:00  German Industrial Production. Exp. -0.5%.  
  • 17:40 US FOMC member  Dennis Lockhart.
  • 20:00 US  Consumer Credit. Exp. 7.1 billion.

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

EUR/USD Sentiment

  • All wrong in Greece: After Greece’s PM Papademos said that the country will default in March without a second bailout plan, the IMF also said the country needs more aid. In addition, some IMF members have doubt that Greece has a chance to make. The Private Sector Involvement (PSI) scheme isn’t getting closer, and a German politician said the country needs a bigger haircut. Greek industrial output contracted sharply.
  • Merkozy Meeting: German and French leaders meet to discuss future fiscal union. The unsustainable debt load of Italy, and the troubles in Greece. This is a preparation for a bigger EU summit on January 30th.
  • US Non-Farm Payrolls Encouraging: The US job market gained 200K jobs in December and the unemployment rate fell once again, to 8.5% this time. This continues the positive trend seen in US figures, but it also relies on tax incentives that expired. The big question remains open: can the US decouple from the rest of the world?
  • France and EFSF successful auctions: 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.
  • 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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