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EUR/USD was unable to break resistance and is now falling, as the denials of Greek restructuring are easing and more worries come out of Spain. Later the Fed will be in the limelight. Is a breakdown coming? Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: Active session sees the pair climb higher towards resistance at 1.4282, but it failed to advance in the European session.
  • Current range 1.4160 – 1.4282.

EUR USD chart May 18

  • 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,
  • 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

  • 17:30 US FOMC member Richard Fisher talks. Hawkish tone expected.
  • 18:00 US FOMC Meeting Minutes published.

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

EUR/USD Sentiment

  • Restructuring / Reprofiling / Rescheduling: 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. The banks were already instructed to get ready for 20%-30% haircut. 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.
  • 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.
  • Tightening in the US: The meeting minutes will contain the different views of FOMC members about future policy as QE2 ends. 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 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.

FXCM Speculative Sentiment Index shows smaller gains for the euro: 55% are short, up from 54% yesterday. According to this contrarian index, this shows a stronger recovery for EUR/USD.