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Euro dollar starts the week lower, hit by the failure of the European leaders to reach an agreement on the next Greek payment. They delayed the decision until July, saying that Greece has to first approve fresh austerity measures. The markets don’t like it. Also weak German PPI doesn’t help the euro . Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

EUR USD Chart June 20 2011

  • Further levels in both directions: Below 1.4220, 1.4160, 1.4030, 1.3950, 1.3860, 1.3750, 1.3440.
  • Above:    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.
  • 1.4282 must be reconquered in order to convince that a recovery is underway.

Euro/Dollar sliding lower  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00  German PPI. Exp. +0.2%. Actual 0%. – less pressure for a rate hike.
  • 8:00 European  Current Account. Exp. -4.8 billion.

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

EUR/USD Sentiment

  • Second emergency meeting fails: The European finance ministers were busy from late afternoon to the early hours of dawn to try to reach an agreement. At some stage, an option to pay only half of the next tranche was discussed. The Germans still insisted in some private sector involvement, as the agreements between Merkel and Sarkozy on Friday collapsed. At the end, they called the Greeks to do their part in making cuts, and delayed the decision until the beginning of July – the very last moment.
  • Greece political mess: A new finance minister was appointed in Athens, while protests mount. The Greek parliament is due for a vote of confidence on Tuesday. The session, that began on Sunday, included an announcement from Greece’s prime minister Papandreou about a referendum in the autumn to discuss reforms. This doesn’t look good – he is losing support.
  • Contagion risks in Spain: Spanish bond yields broke above the critical 5.6% level last week, before retreating. Over the weekend, protests against austerity hit Spain, that deals with a big deficit. The banks are increasingly dependent on the ECB. This is not only due to Greek contagion, but also to the fear that there is a lot of hidden debt in Spain.
  • 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.