EUR/USD May 19 – Dropping in Channel As Discussions over

EUR/USD is sliding in an uptrend channel, but remains quite choppy, as talks about restructuring for Greece intensify and get more complicated. Major US figures will dominate the scene soon. Will the pair break out of the channel? Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

• Asian session: Active session sees a a gradual climb, and a failed attempt to break above 1.4282.
• Current range 1.4160 – 1.4282.

• Further levels in both directions: Below 1.4160, 1.4030, 1.3950, 1.3860, 1.3760, 1.3570, 1.3440.
• Above:  1.4282, 1.4375, 1.4450, 1.4580, 1.4650, 1.47, 1.4775, 1.4882, 1.5020,
• The channel on the hourly chart starts at the beginning of the week. Uptrend support is getting closer.
• 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.
• 1.4282, the peak from November 2010, returns to the limelight as strong resistance.

Euro/Dollar bouncing off resistance  – click on the graph to enlarge.

EUR/USD Fundamentals

• 12:30 US  Unemployment Claims. Exp. 421K.
• 13:00 ECB president Jean-Claude Trichet talks.
• 14:00 US Philly Fed Manufacturing Index. Exp. 20.2 points.
• 14:00 US Existing Home Sales. Exp. 5.21 million.
• 14:00 US  CB Leading Index. Exp. +0.2%.
• 14:00 US Mortgage Delinquencies.
• 16:00 US FOMC member William Dudley talks. Dovish tone expected.
• 17:30 US FOMC member  Charles Evans talks. Hawkish tone expected.

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

EUR/USD Sentiment

• Jean-Claude VS Jean-Claude: ECB president Jean-Claude Trichet reportedly left a meeting with anger over the use of the new buzzwords (re-profiling, soft restructuring) by Jean-Claude Juncker, head of the Eurogroup. The economic jargon is widened with many creative words regarding the Greek crisis. Whatever the details and the title is, it’s now clear that bondholders won’t get fully paid, despite the fierce opposition from the ECB, that holds a lot of Greek debt. Germany wants to delay the decision as much as possible. This delay is meant to prepare the public. But the markets don’t need preparation. They’re moving.
• Jobs improvement in the US?: Weekly jobless claims jumped back to higher levels in the past weeks, triggering worries. We’re now expecting an improvement. A drop under 400K is necessary.
• Spanish fears: Fresh protests in Spain against corruption come on the background of hidden debt that is postponed until the regional elections on Sunday. When elections are over, the politicians will have to deal with it. In the meantime, a Spanish bond auction was OK.
• Slow Tightening in the US: The meeting minutes hints on very gradual tightening – nothing unexpected. They did decide on QE2 Lite, and this hurt the dollar. The minutes will allow us to see what the hawks think, and we know there are quite a few of them.
• 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 quits: Dominique Strauss-Kahn, head of the IMF, that was arrested in New York for charges on a sex crime, resigned, although he continued to plead not guilty. 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.

FXCM Speculative Sentiment Index shows smaller gains for the euro: 53% are short, down from 54%. According to this contrarian index, this shows a weaker recovery for EUR/USD.