Euro dollar is holding so far above the 1.30, within the downtrend channel. The dollar storm ignited by Bernanke takes a pause for now. Will the storm resume and send the pair fall below this level? The Eurogroup finally gave its final green light to the Greek bailout, and today’s its the turn of the IMF. Important US figures are awaiting us.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session: A quiet session saw the pair hold above 1.30. It began drifting up at the beginning of the European session, but didn’t get too far.
- Current range: 1.30 to 1.3080.
- Further levels in both directions: Below: 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2620.
- Above: 1.3080, 1.3150, 1.3212, 1.3280, 1.333, 1.3430, 1.3486, 1.3550 and 1.3615.
- A downtrend channel is emerging, as you can see in the graph.
- Note that 1.30 is a psychologically important number, but doesn’t offer much support.
- 1.3280 proved to be strong on the upside once again.
Euro/Dollar holding on to support – click on the graph to enlarge.
- 9:00 ECB Monthly Bulletin.
- 10:00 Euro-zone Employment Change. Exp. -0.2%. Actual -0.2%.
- 12:30 US Jobless Claims. Exp. 357K.
- 12:30 US PPI. Exp. +0.5%. Core PPI exp. +0.2%. Inflation is becoming important after the recent FOMC Statement.
- 12:30 US Empire State Manufacturing Index. Exp. 17,6 points.
- 13:00 US TIC Long-Term Purchases. Exp. 38.9 billion.
- 14:00 US Philly Fed Manufacturing Index. Exp. 11.9 points. See how to trade this event with USD/JPY.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment – Details of hurdles
- Relatively Bullish Bernanke: The FOMC left policy unchanged, as expected. This strengthened the US dollar significantly and triggered a dollar storm. The statement included an acknowledgement of higher oil prices and a more upbeat wording regarding employment, such as “the unemployment rate has declined notably”. The impact of no QE3 or no hints of QE3 isn’t fully felt in the markets.
- IMF Expected to Release Money to Greece: The Eurogroup gave the final approval to the second Greek bailout, worth 130 billion in total. This happened after Greece completed the PSI successfully and the new estimation is that Greece will now reach a debt-to-GDP ratio of 117% in 2020. A fresh troika reports see Greece missing 2013 targets already, with more austerity needed after the elections. The IMF will decide on its contribution on today. Greece already concentrates on politics towards the upcoming elections.
- Rising US bond yields: Yields on short term and long term US yields are on the rise, and this pushes funds into dollars. The effect is stronger in USD/JPY, but EUR/USD can’t ignore it. Since Bernanke’s move, stock markets and the dollar move together. This is a big change. Good US news helps the dollar, and bad news weakens it. This may sound very normal, but it hasn’t always been this way. See the video explanation here.
- Fitch upgrades Greece: This rating agency discontinued coverage of the old bonds, and set a rating of B- to new ones – this is a junk bond rating. Also yields on Greece’s new, swapped, 10 year bonds point to trouble – 19%.
- Worries from China: The economic giant joined its neighbor Japan and posted a huge trade deficit. This weighs on the “risk environment” and helps the US dollar.
- PSI – deadline open for foreign law bonds: Greece completed the PSI for Greek law bonds. The new ones are already trading at a quarter of a euro on the euro, reflecting a high chance of another default. There is a small portion of bonds under international law. The deadline for the PSI on these bonds is March 23rd. Note that there are specific bonds that include a loophole – one that could still cause a delay
- Draghi warns about inflation: The ECB left rates unchanged and made no policy changes. In the press conference, Draghi was very satisfied with the LTROs. He also warned about inflation, and said that the ECB has tools to fight it. Today’s CPI will provide more insight.