EUR/USD July 4 – Calm Before the Storm

Euro dollar is steady in range as the very busy week is about to unfold,. In the meantime, Independence Day in the US slows things down. A move higher was erased by fears of complications around the private sector contribution for Greece. Will a selective default be announced in any case?

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 rise above 1.4550 only to drop lower soon afterwards.
• Current range 1.4450 to 1.4550.

• Further levels in both directions: Below 1.4450, 1.4375, 1.4282, 1.4220, 1.4160, 1.4120, 1.4030, 1.3950,
• Above:   1.4550,1.4650, 1.47, 1.4775, 1.4882.
• Uptrend support is well below the pair at the moment.
• 1.4450 is a key line separating ranges. A break lower could open the door for quicker falls.
• 1.4550 proved to be strong barrier on the downside a few weeks ago and now on the upside, holding strong up to now.

Euro/Dollar steady in range  – click on the graph to enlarge.

EUR/USD Fundamentals

• 8:30 European Sentix Investor Confidence. Exp. 5.3 points.
• 9:00 European  PPI. Exp. -0.1%. Actual -0.2%. As with last week’s CPI, this will not stop Trichet from raising the interest rate.

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

EUR/USD Sentiment

• Will Greece still default? 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.
• Trichet will raise the rates: The president of the ECB spoke at the European parliament and made it clear that the central bank will raise the rates. The fresh inflation figure was only marginally lower than expected. This won’t stop the hike. The hike will hurt struggling countries, but this doesn’t seem to be of interest to the ECB. A bad unemployment rate today won’t stop Trichet.
• A good Non-Farm Payrolls? The event that will close the week is the release of NFP in the US. A first good sign came from the manufacturing sector. US ISM Manufacturing PMI came out better than expected, and this is encouraging.
• Greek votes pass.  Greek parliament passed the austerity measures with a solid majority. Also the second vote passed successfully, despite loud protests. This paves the way for the approval of the next tranche of aid for Greece in the meeting of finance ministers this Sunday. The acting managing director of the IMF, Lipsky, will attend this meeting.
• No QE3: In the press conference that followed the rate decision, Ben Bernanke played down the option of another quantitative easing program. He compared the same period one year ago, and said that employment is rising faster and there is no threat of deflation now. No new dollar printing is good for the dollar. QE2 just ended now. Will we see a stronger dollar?