Euro dollar is sliding in range as fresh fears rose about the implementation of the decisions in the EU summit. The euro is unable to enjoy the weakness of the greenback across the board, as no solution to the debt ceiling crisis is in sight.
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
- Asian session: A relatively quiet session saw the pair trade above 1.45, before sliding in the wake of the European session.
- Current range 1.4450 to 1.4550.
- 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.
- The 1.4450 line is a significant cushion for the pair.
- 1.4550 is the next level of resistance and it is quite serious.
Euro/Dollar sliding lower – click on the graph to enlarge.
- During the day: German CPI. Exp. +0.3%.
- 6:00 German Import Prices. Exp. 0%. Actual -0.6%.
- 8:00 European M3 Money Supply. Exp. +2.4%. Actual +2.1%.
- 12:30 US Durable Goods Orders. Exp. +0.4%. Core orders exp. +0.5%.
- 18:00 US Beige Book.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
- German finance minister doubts Brussels deal: Despite all the agreements, doubt about the results is beginning to appear. German finance minister Wolfgang Schaeuble said he is “against a carte blanche for the euro zone’s rescue fund to purchase bonds on the secondary market”. This mechanism is the key for preventing further bailouts. Spanish and Italian bond yields reacted with a jump. Spanish yields refuse to go below 6%. Italy cancelled a planned bond auction. There are worrying signs in Europe.
- Doubts about the agreement: Schaeuble joins previous worries. 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.
- 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.
- Slowdown in growth and in prices: 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. Now we also see that the demon of inflation isn’t that fierce. Next week, Trichet might sound more soft.