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EUR/USD is moving forward despite weak ZEW Economic Sentiment and growing worries concerning the debt crisis. Will it keep up, or is it the calm before the collapse? Quite a few US figures are awaiting us. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: Quiet session sees trading around the 1.4160 level.
  • Current range 1.4160 – 1.4250.

EUR USD chart May 17

  • Further levels in both directions: Below 1.4160, 1.4030, 1.3950, 1.3860, 1.3760, 1.3570, 1.3440.
  • Above:  1.4250, 1.4375, 1.4450, 1.4580, 1.4650, 1.47, 1.4775, 1.4882, 1.5020,
  • 1.4030 is critical support – it has been a very distinct line, separating range. A loss of this line will open the road to quicker falls.
  • 1.4250 is a front line before the weakening 1.4282 and before 1.4375. A break above this line will reinforce the bulls.

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

EUR/USD Fundamentals

  • 9:00  German ZEW Economic Sentiment. Exp. 4.8 points. Actual 3.1 – Optimism is low.
  • 9:00 All European  German Economic Sentiment. Exp. 17.9. Actual 13.6.
  • 12:30 US  Building Permits. Exp. 590K.
  • 12:30 Housing Starts. Exp. 580K.
  • 13:15 US Industrial Production. Exp. +0.5%.
  • 13:15 US Capacity Utilization Rate. Exp. 77.7%.

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

EUR/USD Sentiment

  • German worries: While Germany continues to lead the Euro-zone (especially seen in GDP), the drop in factory orders and the fresh weaker sentiment among investors is worrying. It’s important to note that the current situation is still good, but there’s less optimism about the future.
  • Debt crisis worries from 6 countries: Fresh news around the meeting of finance ministers regarding the three troubled countries, and data from 3 other countries, including Spanish hidden debt, are a reason for great concern.
  • IMF head arrested in New York: Dominique Strauss-Kahn, head of the IMF, was arrested in New York for charges on a sex crime. DSK had an important role in pushing for the bailouts to which the IMF contributed. His absence from the meetings at this critical time makes decision making much more complicated. Greeks know they lost a friend.
  • 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. This event on May 5th was a turning point for the dollar, euro, and for commodities. See the  ECB analysis for more.

FXCM Speculative Sentiment Index shows smaller gains for the euro: 54% are short, up from 51%. According to this contrarian index, this shows a stronger recovery for EUR/USD.