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EUR/USD moved lower after the Greek hope disappeared and is now recovering, but within the lower range. The previous gains were indeed fragile. Today’s busy calendar can provide more significant shifts. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: Quiet session sees recovery above 1.42, but limited to 1.4240..
  • Current range 1.4160 to 1.4282..

EUR USD Chart May 12

  • Further levels in both directions: Below 1.4160, 1.4030, 1.3950, 1.3860, 1.3760.
  • Above:  1.4282, 1.4375, 1.4450, 1.4580, 1.4650, 1.47, 1.4775, 1.4882, 1.5020,
  • 1.4160 was a pivotal line before the big break higher, and also a swing low later on..
  • Note that 1.4282 is backed by 1.4250 – it happened also in the other direction, when 1.4250 was the front line before the November high of 1.4282 was reached.

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

EUR/USD Fundamentals

  • 5:30  French CPI. Exp. +0.5%. Actual +0.%.
  • 8:00  ECB Monthly Bulletin. Exp. Dovish.
  • 9:00 European  Industrial Production. Exp. +0.4%.
  • 12:30 US  Retail Sales. Exp. +0.5%. Core exp. +0.7%.
  • 12:30 US PPI, Exp. +0.6%. Core exp. +0.2%.
  • 12:30 US FOMC member Charles Plosser talks. Exp. Hawkish.
  • 14:00 US Federal Reserve Chairman Ben Bernanke talks.
  • 14:00 US  Business Inventories. Exp. +0.8%.

For more events later in the week, see the  EUR/USD forecast

EUR/USD Sentiment

  • Greek pessimism: Merkel is moving quite slowly for a second bailout program for Greece. Waiting for fresh tests makes everybody worried, and this pushed the Euro lower. And in the meantime, Greek has seen strikes that turned violent. It’s almost a week since the emergency meeting, and nothing is clear yet..An emergency meeting by finance ministers on Friday night probably discussed a second bailout program for Greece and not an exit of the debt laden country out of the EU. This opened the door for restructuring. Merkel understands that there are no better options. Note that on May 17th, there’s a meeting of economy and finance ministers from all over the Euro-zone.
  • Bernanke can help the Euro: The market awaits Ben Bernanke’s testament. Given his dovish appearances in the past, he may help the euro recover.
  • IMF Warns on contagion: The International Monetary Fund is also a part of the bailout mechanism, and it isn’t optimistic at all.
  • Spanish worries: Spain’s story is too similar to Ireland. It has managed to decouple itself from Ireland, Greece and Portugal, but for how long?
  • Irish contagion: There are growing signs that Ireland wishes to bail out of the bailout program. An influential professor explained how it should be done, and some government officials are already saying the Ireland cannot pay its debt. This is gaining traction quickly with the prime minister already being convinced that Ireland will at least get a reduced rate, he’s under pressure in parliament to free Ireland of the bailout.
  • Trichet boosts the dollar: The president of the ECB not only hinted that the rate hike will be pushed back to July, but also expressed deep concern about the weakness of the dollar, taking his time in quoting US policymakers about the importance of a strong dollar. EUR/USD lost over 300 pips, commodities lost a lot of ground and the dollar rallied across the board. See the  ECB analysis for more.

FXCM Speculative Sentiment Index shows smaller gains for the euro: 51% are short, down from 53% yesterday. According to this contrarian index, this shows more, yet limited recovery for EUR/USD.