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EUR/USD jumped on fresh hopes that China will help in solving the European debt crisis, but is now consolidating and leaning lower as this effect fades out. There is a rumor about an upcoming end to the war in Libya. Later we have very important US figures. 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: A very active session sends the Euro above 1.4160 to touch 1.42 before Europeans send it lower.
  • Current range 1.4030 – 1.4160.

EUR USD chart May 26

  • 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 consolidating gains  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00  German Import Prices. Exp. +0.8%. Actual +0.3%.
  • 9:20 ECB president Jean-Claude Trichet spoke – nothing new.
  • 12:30 US GDP (second release). Exp. Upwards revision to 2.2%.
  • 12:30 US Unemployment Claims. Exp. 403K

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

EUR/USD Sentiment

  • Ceasefire in Libya?:There’s a rumor that the rebel forces in Libya have reached a deal with Gaddafi’s government on a ceasefire that would turn into a power sharing deal. The major battlegrounds are quiet. Oil is slightly weaker. If this is true, it can help the dollar.
  • Improved growth in the US?: A significant upwards revision of US GDP for Q1, together with a fall in jobless claims, can help the dollar. The exact opposite reaction was seen when the first release was terrible (only 1.8%) and the simultaneous release of jobless claims was terrible.
  • 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?: Yesterday it was ECB member Bini Smaghi that said that it isn’t necessary to overreact to inflation. The small rise in German import prices show that the drop in commodity prices is being felt.
  • German optimism: After  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 5.3% – significantly lower than in previous days, closer to the bottom of the range.