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Euro dollar is showing strength and looking to break, despite growing uncertainty about Greece and numerous observations the the exchange rate is too high. Today we have important data towards the rate decision. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: The session was rather active with the pair gradually climbing up from support and continuing further up. It already reached 1.4666 before falling back.
  • Current range 1.4580 – 1.4650.

EUR USD chart  June 7 2011

  • Further levels in both directions: Below 1.4580, 1.4520, 1.4450, 1.4375, 1.4282 1.4160, 1.4030, 1.3950.
  • Above:  1.4650, 1.47, 1.4775, 1.4882, 1.4940.
  • 1.4580 serves only as weak support. Much more serious support is at 1.4450.
  • 1.4882 is the big hurdle on top.

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

EUR/USD Fundamentals

  • 9:00 European  Retail Sales. Exp. +0.4%.
  • 10:00  German Factory Orders. Exp. +2.1%.
  • 14:00  IBD/TIPP Economic Optimism. Exp. 42.1 points.
  • 19:00 US  Consumer Credit. Exp. 5.2 billion.
  • 19:45 Ben Bernanke talks.

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

EUR/USD Sentiment

  • Calls for a lower exchange rate: Jim O’Neill, of Goldman Sachs, that manages over $800 billion, says that the correct EUR/USD rate should be 1.20. And also Jean-Claude Juncker, head of the Eurogroup, talked about an overvalued euro in a discussion held in the European parliament.
  • Chinese warning about dollar: On the other hand, a China FX official warned about holding too many US dollar denominated assets.
  • Is Germany slowing down?: Last month’s factory orders in Germany were very disappointing – a drop of 4%, and this came just before the rate decision that turned out to be very soft. Will orders recover now?
  • Details for Greece awaited: The Euro enjoyed the news about an upcoming deal for Greece. But according to the German finance ministry, this isn’t certain. The details, especially private sector participation, are still unclear. It’s also unclear if the current Greek government can pass the measures. In the meantime, the central bank in Greece is about to ask the banks to prepare for a possible haircut. See more in 3 Risk Factors in the Euro-zone this week.
  • Weak US economy: The series of weak figures last week culminated in the horrible Non-Farm Payrolls. The big question is: will the US drag everybody down?
  • 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.
  • 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.

FXCM Speculative Sentiment Index shows larger gains for the euro: 61% are short, less  than 68% beforehand. According to this contrarian index, this shows less  gains for EUR/USD.

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