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EUR/USD is moving up, ignoring mounting trouble in the Euro-zone and some better signs of the US economy. Will it break out today? Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session:  EUR/USD dipped to support at 1.4770 and recovered quickly.
  • Current range –  1.4770 – 1.4882

EUR USD Chart May 3

  • Further levels in both directions: Below 1.4770, 1.47, 1.4650, 1.4580, 1.4520, 1.4450, 1.4375, 1.4282, 1.4160, 1.4030,
  • Above:   1.4882, 1.5020, 1.5144, 1.5250, 1.55
  • A false break above 1.4882 was very short lived. Will another attempt succeed?
  • 1.4770 has proven to be very solid as support, marking the bottom border of the range

Euro/Dollar moving up in range  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 9:00 European  PPI. Exp. +0.7%.
  • 14:00 US  Factory Orders. Exp. +1.9%.

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

EUR/USD Sentiment

  • Portugal Bailout at risk: The details for the bailout of Portugal may be released this week, but there’s no certainty that they’ll be approved, as the upcoming Finnish government may reject them, complicating the situation.
  • Greece cannot pay: The Greek government is finally admitting it can’t pay its debt and begins talking about extending the length of the loan from the EU and IMF, as a delegation comes to Greece. New signs over the weekend show that the  European Union is already working a restructuring program for Greece. The announcement can trigger contagion to other countries.
  • First hint towards Non-Farm Payrolls is positive: ISM  Manufacturing  PMI came out better than expected and has shows continued strong growth in this sector. It didn’t help the dollar.
  • Inflation is rising in Europe: Yet again, the initial read of inflation exceeded expectations. Contrary to the US, European eye the headline CPI. No hike is expected next week, but it could push it forward from July to June. Today we’ll get PPI numbers. A surprising rise will fuel the Euro.
  • Bernanke declares QE2 Lite: The first ever press conference by the Fe yielded one important decision: Maturing assets will be reinvested – the central bank will continue being active, even if it won’t expand its balance sheet. This still means printing dollars, and it weakens the dollar across the board. In addition, inflation was dismissed. This theme will accompany us for a long time.

FXCM Speculative Sentiment Index shows that 69% of traders are short, morethan yesterday. According to this contrarian index, this shows more gains for EUR/USD, and now more than beforehand.