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Euro dollar is free falling, after losing uptrend support and various support lines. Fears about the financial situation in Italy as well as a growing acceptance of a Greek default weigh heavily on the Euro. Will it break below the wider range?

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

EUR/USD Technicals

  • Asian session: Active start to the week saw the pair slide towards uptrend support. The break came in the European session.
  • Current range 1.4070 to 1.4120.EUR USD Chart  July 11 2011
  • Further levels in both directions: Below  1.4070, 1.4030, 1.3950, 1.3860, 1.3750.
  • Above:   1.4160, 1.4220, 1.4282, 1.4375, 1.4450, 1.4550
  • Long term uptrend support was at 1.4155. It is gone for now.
  • Next support at 1.4070 is only minor. The big cushion is at 1.4030.
  • On the upside, a reconquer of 1.4160 is necessary.

Euro/Dollar consolidating higher  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:45  French Industrial Production. Exp. +0.5%. Actual +2%. This didn’t cheer up the euro.

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

EUR/USD Sentiment

  • Italian trouble: After the huge sell off of Italian bank stocks and government bonds on Friday, an emergency meeting was called to discuss this. Italian regulators tried to ban “naked shorts” but the situation continues deteriorating. Italian bond yields are at 5.4%, where Spanish yields were in calmer days.
  • Italy and Spain downgrades next?: Spain isn’t immune to the crisis. 10 year bond yields are at record highs of over 5.8%. Italy and Spain could get downgrades from rating agencies. Portugal got a downgrade on the fears of a Greek default. This could spread quickly to both countries.
  • Horrible Non-Farm Payrolls: The situation isn’t much better on the other side of the Atlantic. The US economy hardly gained any jobs in the past two months. This pushed the dollar lower only against certain currencies.
  • Trichet firm on rates, defends Portugal: The ECB raised the interest rate to 1.50% as expected, and kept up the hawkish tone regarding inflation. Trichet also provided support for Portugal, in the wake of the severe downgrade from Moody’s.The rate hike is widely criticizes. It just  exacerbates the debt crisis.
  • Selective default for Greece: Rating agency S&P reasoned quite logically that the “volunteering” of German and French banks to “contribute” wasn’t genuinely out of free will. This means that Greece will be at a state of selective default, keeping it away from the markets for a longer time, and putting the ECB in a tight spot regarding its massive holding of Greek debt. Is it already priced in?  European leaders began acknowledging this during the weekend. A Greek default is out in the open. Trichet can say whatever he wants.
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