EUR/USD July 8 – Sliding From Resistance Before the NFP

Euro dollar is now sliding from high resistance, but still remaining high, enjoying the back wind from Jean-Claude. We have Non-Farm Payrolls, the king of forex, to close the week with a bang. Which direction will it choose?

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

EUR/USD Technicals

• Asian session: Very quiet session sees the pair well capped under 1.4375, but not too far.
• Current range 1.4282 to 1.4375.

• Further levels in both directions: Below  1.4282, 1.4220, 1.4160, 1.4120, 1.4030, 1.3950,
• Above:   1.4375, 1.4450, 1.4550,1.4650, 1.47, 1.4775, 1.4882.
• 1.4450 is significant resistance above, with 1.4375 being only minor.
• The veteran line of 1.4282 continues to be of very high importance. A break below will open the road to 1.4160.

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

EUR/USD Fundamentals

• 6:00  German Trade Balance. Exp. 12.8 billion. Actual 12.8 billion.
• 12:30 US Non-Farm Payrolls. Exp. 100K.  See NFP preview
• 12:30 US Unemployment Rate. Exp.9.1%.
• 14:00 US  Wholesale Inventories. Exp. +0.6%.
• 19:00 US  Consumer Credit. Exp. 5.1 billion.

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

EUR/USD Sentiment

• Good Non-Farm Payrolls? Expectations are now elevated for the Non-Farm Payrolls, after a few indicators turned positive. Note that in case of a  disastrous figure, the dollar may rise, but optimism rules at the moment.
• 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. This helped push the euro higher.
• Contagion still here: Spanish bond yields are still high, and so are Italian Portuguese and Irish bonds. While Trichet managed to calm the markets, the crisis is still very present.
• 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?