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EUR/USD got a blow as Greek debt was “junked” by Moody’s. It is now recovering on thin volume as tension mounts towards the Non-Farm Payrolls. The successful Spanish auction and fresh hopes send it towards resistance. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: The recovery began in the Asian session, that sent the pair above 1.4375. It just broke resistance and now trades above 1.4470 – this was later lost.
  • Current range 1.4450 to 1.4520.

euro to dollar chart june 2 2011

  • Further levels in both directions: Below 1.4450, 1.4375, 1.4282 1.4160, 1.4030, 1.3950, 1.3860, 1.3760, 1.3570, 1.3440.
  • Above:  1.4520, 1.4580, 1.4650, 1.47, 1.4775.
  • 1.4450 is a veteran line of resistance that now returns to have a major role.
  • 1.4375 is weaker now.

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

EUR/USD Fundamentals

  • 12:30 US Unemployment Claims. Exp. 416K. This is the last hint before the NFP. See how to trade USD/JPY on this event.
  • 12:30 US  Nonfarm Productivity. Exp. +1.8%.
  • 14:00 US Factory Orders. Exp. -0.7%.

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

EUR/USD Sentiment

  • Greek talks proceed rapidly: A program for Greece might be concluded tomorrow. Details are emerging.
  • Spanish auction is OK: Spain can still tap the financial markets, although it has to offer a higher yield. This helps the Euro.
  • Greece Junked: Rating agency Moody’s downgraded Greece once again. The difference this time was not only the three notches downgrade, but also the putting the debt in C status – meaning junk –  a default is close. This weakened the Euro.
  • Weak US economy begins weighing on EUR/USD: ADP NFP was a disaster, showing that only 38K jobs were gained. Manufacturing PMI was also bad. These numbers join other bad figures such as Chicago PMI and consumer confidence released earlier this week. But this slowdown impacts the whole world, and sends us back to the risk averse trading: bad US figures mean a stronger dollar against the euro. Normal behavior is still seen against the yen and the franc.
  • First German bank acknowledges Greek haircut: The German Landesbank NordLB wrote down assets related to Greek bonds. Although the sum is small, this is a precedent.
  • Weak European figures: Inflation came out weaker than expected. So did German retail sales and German unemployment and other European numbers. This doesn’t hurt the euro, not yet. But if the German weakness and the softer inflation push the rate hike further back, the euro will sure suffer.

FXCM Speculative Sentiment Index shows larger gains for the euro: 63% are short, more than 59% yesterday. According to this contrarian index, this shows even stronger gains for EUR/USD.