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Euro dollar lost ground and couldn’t get back up after the split between European leaders is becoming more obvious and is preventing a decisive solution. Tension is mounting towards the all-important press conference by Jean-Claude Trichet. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: An active session sees the pair bounce off support and remain in range.
  • Current range 1.4580 to 1.4650.

EUR USD chart June 9 2011

  • Further levels in both directions: Below 1.4650, 1.4580, 1.4520, 1.4450, 1.4375, 1.4282 1.4160, 1.4030.
  • Above:  1.47, 1.4775, 1.4882, 1.4940 and 1.5020.
  • 1.4650 serves only as weak support. Much more serious support is at 1.4450.
  • 1.4882 is the big hurdle on top.

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

EUR/USD Fundamentals

  • 11:45 European rate decision. Exp. Unchanged at 1.25%.
  • 12:30 Jean-Claude Trichet’s press conference.
  • 12:30 US  Unemployment Claims. Exp. 424K.
  • 12:30 US Trade Balance. Exp. -48 billion.
  • 14:00 US  Wholesale Inventories. Exp. +1%.
  • 15:30 US FOMC member Janet Yellen speaks. Dovish tone expected.
  • 18:00 US FOMC member Charles  Plosser talks. Hawkish tone expected.

 

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

EUR/USD Sentiment

  • All eyes on Trichet: The words of ECB president Jean-Claude Trichet at the press conference will be the key. The market expects him to say “strong vigilance” towards inflation, signalling  a hike in July and sending the euro higher. A repeat of the previous words “very closely monitoring” mean another delay and cannot be ruled out. See ECB preview here.
  • Split over Greece widens: German finance minister Wolfgang Schaeuble insists on a “prolongation” of Greek bonds for seven years. He urged a decision on this by June 20th. The ECB strictly opposes it. Trichet is likely to be asked about this in the press conference. Time is running out, as Greece will run out of money by mid July. Christine Lagarde which is the leading candidate to lead the IMF, still oppose Greek restructuring.
  • Contagion risks: There are fears in Ireland that a Greek restructuring will hammer Irish bonds, sending them to junk status and keep Ireland away from the market for too long.
  • Ben Bernanke doesn’t provide hope: The chairman of the Federal Reserve was busy answering to his critics but didn’t provide hope about the global economy. At least he didn’t talk about QE3…
  • 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. This factor can push Trichet to a delay in the rate hike.
  • 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.

 

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