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Euro dollar  made a break above long term downtrend resistance as the dollar loses ground across the board. The public disagreement between the political sides in Washington got the markets selling off the dollar, also against the euro, and despite European worries. We have quite a few US indicators today. Where will it go?  

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

EUR/USD Technicals

  • Asian session: A very active session saw the pair break above downtrend resistance and above the 1.4450 line, settling in higher range.
  • Current range 1.4450 to 1.4550.EUR USD Chart July 26 2011
  • Further levels in both directions: Below  1.4450, 1.4375, 1.4325, 1.4282, 1.42, 1.4160,
  • Above:  1.4550, 1.4650, 1.47, 1.4775, 1.4882, 1.4940.
  • 1.4450 is now broken and below. This is not only a resistance line turned into support, but also the area where long term downtrend resistance caps the pair. On the daily chart, The line that began at the  1.4940 peak follows the 1.4575  mini-peak from the beginning of July and hits the charts today already below 1.4450. The pair is significantly higher.
  • 1.4550 is the next level of resistance and it is quite serious.

Euro/Dollar sliding lower  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00 German Consumer Climate. Exp. 5.6 points. Actual 5.4 points.
  • 13:00 US  S&P/CS Composite-20 HPI. Exp. -4.6%.
  • 14:00 US  New Home Sales. Exp. 320K.
  • 14:00 US  CB Consumer Confidence. Exp. 57 points.
  • 14:00 US  Richmond Manufacturing Index. Exp. 5 points.

* All times are GMT.

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

EUR/USD Sentiment

  • US Debt Talks Weighing heavily on the dollar: After negotiations broke up late on Friday, the reaction was mild. But when both sides expressed their discontent publicly yet again in speeches (Obama and Boehner) the dollar tanked. The current deadline of August 2nd is getting closer.There are various options for a resolving the situation. Currently the drop dead date of August 2nd is just one week away and a major breakthrough isn’t seen in the horizon. A rating downgrade of the US is on the cards. Needless to say, a US default will rock the markets and send the dollar down. See three options about how this crisis could unfold.
  • A big step in Europe?: The leaders of the EU took big steps towards a full monetary union. The loans will be of longer maturities, the interest rates will be lower, and the bailout fund will be able to intervene in the markets and buy bonds – avoiding a bailout ahead of time. A European version of the IMF is also underway. Regarding the new package for Greece, it includes significant private sector participation. The EU is ready to accept that the rating agencies will declare a credit event that will trigger CDS. Moody’s and Fitch actually stamped it as default.  The Euro reacted with a huge rise after the news broke out. See more about the press conference that followed the summit.
  • Market doubts about Brussels deal: Despite all the aforementioned agreements, doubt about the results is beginning to appear. IS this debt relief enough for Greece? Will the plan be approved by the national parliaments? And why shouldn’t Ireland default as well? Spanish bond yields are around 6% once again, and Italian yields are back to 5.55%. While the focus is currently on the US, this development is quite worrying.
  • Slowdown: It is not only peripheral countries that are struggling. Also Germany and France have reported a significant slowdown in activity, in both manufacturing and services sectors. And today, the wide IFO survey, that is usually positive, points to a soft landing for Germany.

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