Euro dollar is in much lower ground after Ben Bernanke made a small positive remark about employment and lowered the chances of QE3. The highly anticipated LTRO came out as expected. Banks are now better equipped for a Greek crash. As there’s not LTRO 3 in sight, the ECB had to return to the markets and lower yields on Portuguese bonds. EU leaders will see if Greece filled the prior actions demanded from it. The ISDA will likely declare an outright Greek default, and trigger CDS, today. It’s also a busy day in economic indicators.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session: Easy session after Bernanke’s blow, with the pair consolidating around the 1.3333 battle line.
- Current range: 1.3333 to 1.3430.
- Further levels in both directions: Below: 1.3333, 1.3280, 1.3212, 1.3145, 1.3060, 1.3060, 1.2945, 1.2873 and 1.2760.
- Above: 1.3430, 1.3486, 1.3550, 1.3615, 1.37, 1.38 and 1.3950.
- 1.3333 is now a battle line. The break below wasn’t confirmed.
- 1.3430 turns into resistance.
Euro/Dollar struggling on low ground – click on the graph to enlarge.
- 9:00 Euro-zone Final Manufacturing PMI. Exp. 49 points. Actual 49 points.
- 10:00 Euro-zone CPI Flash Estimate. Exp. 2.6%.
- 10:00 Euro-zone Unemployment Rate. Exp. 10.4%.
- Time unknown – ISDA Announcement about Greek CDS.
- 13:00 US FOMC member Sandra Pianalto talks.
- 13:30 US Unemployment Claims. Exp. 350K.
- 13:30 US Personal Spending. Exp. +0.4%.
- 13:30 US Personal Income. Exp. +0.5%.
- 13:30 US Core PCE Price Index. Exp. +0.2%.
- 15:00 US US Federal Reserve Chairman Ben Bernanke talks again. He might change his stance.
- 15:00 US ISM Manufacturing PMI. Exp. 54.6 points. Employment component important for Non-Farm Payrolls.
- 15:00 US Construction Spending. Exp. +1.1%.
- 15:30 US FOMC member Sarah Bloom Raskin talks.
- 17:30 US FOMC member Dennis Lockhart talks.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment – Details of hurdles
- Ben Bernanke acknowledged improving employment: The vast majority of Bernanke’s testimony was dovish, seeing many risks in the US. Nevertheless, he said that the improvement in employment surprised him. This was enough to boost the dollar, big time. Chances for QE3 in March 13th remain low. Bernanke continues testifying today.
- ECB LTRO II: Around 800 European banks grabbed nearly 530 billion euros. They are now better equipped for a crash and European leaders can feel safe and let go of Greece. The side effect was that banks accumulated sovereign bonds as collateral for the operation. Without LTRO 3 in sight, Portuguese bonds sold off immediately after LTRO 2. The ECB found itself intervening after two quiet weeks.
- ISDA Ruling: The international body responsible for deciding if there was a default or not regarding CDS is expected to announce that Greece is in default, and that CDS should be paid out. This is the situation that leaders wanted to prevent, but the ECB subordination and the CACs that Greece approved look like a default. If CDS isn’t triggered, what good is it for?.This moves joins the declaration of a selective default by S&P. A special report about Greece is ready for you to download. Just join the newsletter and get the report.
- German ministers wants Greece to go: In a passive aggressive move, German finance minister Wolfgang Schäuble said that he will respect countries who want to leave. Greece doesn’t want to leave, but there’s a growing notion that it is pushed to declare bankruptcy. This joins the words of Hans-Peter Friedrich that said he would advise Greece to leave the euro-zone and said that Greece should be “made an offer it can’t refuse” to leave.
- IMF Contribution Only in Second Week of March: The International Monetary Fund, which is massive funding from the US, is expected to provide a much smaller contribution to the second bailout. This means that EU countries will have to contribute more. The decision will take place only in the second week of March.
- German court hurdle: A German court might delay the euro-zone aid package by forcing a different procedure in parliament. Given past experience, this hurdle will likely be overcome.
- Plan B still possible: Despite the deal, things, such as the IMF contribution or more Greek misses, could still go wrong. There are reports about plans made in Germany and the US for a Greek bankruptcy on March 23rd, when Athens will raise a white flag and a bank holiday will be announced. Here are 5 more ominous signs that Greece is pushed to the corner.
- US Housing still sensitive: The sensitive housing sector has shown minor improvement via the existing home sales figure . Single family houses are still struggling, as well as foreclosures. The trend of falling jobless claims, at least in the 4 week moving average continued. The Case Schiller index becomes more important due to this sensitivity.