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Euro dollar falls back to the pivotal support line after some correction of the big falls. It’s unclear whether Greece will get the necessary aid to survive as we enter the weekend. We have a few US events to wrap up the week, and possibly some fresh news from Greece, which has rocked the currency on recent Fridays . Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: This session marked the fresh fall of the pair as the recovery ended.
  • Current range 1.4030 to 1.4160

EUR USD Chart June 17 2011

  • Further levels in both directions: Below 1.4030, 1.3950, 1.3860, 1.3750, 1.3440.
  • Above:   1.4160, 1.4282, 1.4375, 1.4450, 1.4550 and 1.4650.
  • Critical support is at 1.4030 above the round number of 1.40. Another strong line is 1.3950.
  • 1.4160 now turns into resistance.

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

EUR/USD Fundamentals

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

EUR/USD Sentiment

  • Greece stuck between hope and despair: The IMF pledged to aid Greece and definitely ignored its own estimation that the country didn’t meet the IMF’s demands. On the other hand, there are talks that the next tranche for Greece will arrive only in September. This uncertainty weighs on the Euro. The Greek Prime Minister presented his new government with a new finance minister: Evangelos Venizelos, His job is quite impossible. This government will undergo a vote of confidence on Tuesday. There is another meeting of finance ministers on Sunday, which will be critical.
  • Contagion risks in Ireland: The Irish finance minister said that he wants burden sharing for senior bondholders of Irish banks following the German suggestion for Greece. This means trouble.
  • Contagion risks in Spain: Spanish bond yields broke above the critical 5.6% level, and reached a euro-area high of 5.65%. This is not only due to Greek contagion, but also to the fear that there is a lot of hidden debt in Spain.
  • European leaders still split: The Dutch member of the ECB, Wellink, suggested to double the bailout fund. This doesn’t help the euro. The emergency meeting of Euro-zone finance ministers in Brussels failed to reach an agreement as the rift between the ECB and Germany continues. Another meeting is scheduled for next week.
  • German banks ready to contribute: Over the weekend, it seems that pressure for restructuring of Greek debt pushed the German banks to volunteer to participate in Greek losses. This joins approval from Jean-Claude Juncker to the German plan and a comment made by a senior German adviser that a Greek default could be weathered. The ECB is cornered.

FXCM Speculative Sentiment Index shows smaller gains for the euro: 52% are long, the same as yesterday. According to this contrarian index, this shows losses for EUR/USD.

 

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