EUR/USD May 24 – Fails to Hold on to Gains

EUR/USD fought its way up, riding on positive numbers from Germany, but couldn’t hold on to the gains and is still far from resistance and from last week’s level. Today, US figures joins in. Where will it go? Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

• Asian session: Rather active sees the Euro push forward and conquer the 1.4030 line. The pair pushed higher in the European session, but retreated.
• Current range 1.4030 – 1.4160.

• Further levels in both directions: Below 1.4030, 1.3950, 1.3860, 1.3760, 1.3570, 1.3440.
• Above:  1.4160, 1.4282, 1.4375, 1.4450, 1.4580, 1.4650,
• 1.4030 was overridden several times now. But the first, initial dip, could be a warm up for the real thing
• 1.4160 is a veteran resistance line, and also the close last week. The Euro couldn’t get back to those levels this week.

Euro/Dollar struggling  – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:00  German Final GDP. Exp. +1.5%. Actual +1.5%.
• 8:00  German Ifo Business Climate. Exp. 113.7. Actual, 114.2. Positive surprise.
• 9:00 European  Industrial New Orders. Exp. -1.2%. Actual -1.8%.
• 13:00 Belgian  NBB Business Climate. Exp. 2.8 points.
• 13:50 US FOMC member Charles Plosser talks. Hawkish tone expected.
• 14:00 US New Home Sales. Exp. +305K.
• 14:00 US  Richmond Manufacturing Index. Exp.+10 points.

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

EUR/USD Sentiment

• Greek Austerity stuck: Greek prime minister Papandreou announced new cuts and privatizations and said that there would be no restructuring of Greece’s debt. He refused to comment on an option of “re-profiling”. The main opposition party rejects the new cuts.  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. It is clear that  Greece will default.
  
• Inflation not so bad?: ECB member Bini Smaghi says that it isn’t necessary to overreact to inflation. He did also state that the central bank will do all that is necessary to ensure price stability, but ECB members are usually more hawkish.
• German optimism: After yesterday’s worrying PMI figures from Germany, we got encouraging figures from the IFO Think Tank. This gave a boost to the Euro.
• Spanish protests and yields calm: Protests are still active in the main squares of Spanish cities, but there is no new development after the regional elections. These elections were a blow to the ruling socialists. The new authorities might reveal a huge pile of hidden debt. Spanish yields on 10 year remain stable at 5.5% – still high, but manageable.
• Italy and Belgium get credit warning: S&P waited for the weekend, but dropped a warning about Italy’s credit. Italy is a core county, the third largest economy in the Euro-zone. Bad news indeed. This was followed by Fitch, with a similar warning to Belgium – the core of the core of the EU.
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