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EUR/USD is recovering from the blows it got from Trichet and the new Greek crisis and moving higher, also on good German trade balance. But this correction is limited by resistance. As the Pandora box of restructuring is open, is the pair getting ready for another fall?. Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: An active session saw the pair jump higher with a Sunday gap, and eventually climb over 1.4375.
  • Current range –  1.4375 to 1.4450

EUR USD Chart May 9

  • Further levels in both directions: Below 1.4375, 1.4282, 1.4160, 1.4030,
  • Above:   1.4375, 1.4450, 1.4580, 1.4650, 1.47, 1.4775, 1.4882, 1.5020, 1.5144, 1.5250, 1.55
  • 1.4375 is only minor support, with the veteran 1.4282 being of higher importance.
  • 1.4450 held before the Greek news, and now capped the pair. 1.4580 is more significant

Euro/Dollar correcting in lower range  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00 German Trade Balance. Exp. +12.5 billion. Actual 15.2 billion. Good surprise.
  • 8:30 European  Sentix Investor Confidence. Exp. 14.3 points. Actual 10.9.

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

EUR/USD Sentiment

  • Greek Bailout II: An emergency meeting by finance ministers on Friday night probably discussed a second bailout program for Greece and not an exit of the debt laden country out of the EU. This temporarily calms the markets, although this sure opened the door for restructuring. Merkel understands that there are no better options.
  • Irish contagion: There are growing signs that Ireland wishes to bail out of the bailout program. An influential professor explained how it should be done, and some government officials are already saying the Ireland cannot pay its debt. This is gaining traction quickly.
  • Non-Farm Payrolls: The leading forex market mover was surprisingly good, with a gain of 244K jobs. This provides some good news for the dollar, given bad signs for the economy seen beforehand.
  • Trichet boosts the dollar: The president of the ECB not only hinted that the rate hike will be pushed back to July, but also expressed deep concern about the weakness of the dollar, taking his time in quoting US policymakers about the importance of a strong dollar. EUR/USD lost over 300 pips, commodities lost a lot of ground and the dollar rallied across the board. See the  ECB analysis for more.
  • Bernanke declares QE2 Lite: The first ever press conference by the Fed  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. It currently seems that Bernanke is right about inflation being transitory. But his dovish tone, plus the two others’ may reverse the current move.