EUR/USD Nov 14 – Higher, but Greek Uncertainty Continues

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The EUR/USD was up slightly from yesterday’s (Nov. 13th) levels, but the uncertainty over aid for Greece continues to weigh on the markets. At a meeting in Brussels, European finance ministers and the IMF failed to reach an agreement on Greece’s debt, which is needed in order for Greece to receive more bailout funds. This, despite the fact that Athens managed to pass a deeply unpopular austerity budget. With the country expected to run out of funds in a matter of days, pressure is growing on Greece and its lenders to reach an agreement, and further uncertainty will continue to weigh on the euro. In today’s economic news, Euro-zone Industrial Production fell 2.5%, its sharpest drop since March 2009. Italy posted some good news as the yield on 10-year bonds dropped. In the US, the highlights are Retail Sales and PPI.

 

EUR/USD Technical

  • Asian session: Euro/dollar edged upwards, and consolidated around 1.2725. The pair is slightly higher in the European session.
  • Current range: 1.2690 to 1.2750.

Further levels in both directions:   

  • Below: 1.2690, 1.2624, 1.2590, 1.25, 1.2440, 1.2390, 1.2250, 1.2140 and 1.2042.
  • Above: 1.2750, 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, and 1.3170.
  • 1.2690 is back in a support role as the pair has strengthened.
  • 1.2750 is the next line on the upside.

Euro/dollar higher despite Greek concerns – click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:45 French CPI. Exp. +0.2%. Actual +0.2%.
  • 10:00 Euro-zone Industrial Production. Exp. -1.6%. Actual -2.5%.
  • 10:26 Italian 10-year Bond Auction. Actual 4.81%..
  • 13:30 US Core Retail Sales. Exp. +0.2%.
  • 13:30. US PPI. Exp. +0.2%.
  • 13:30 US Retail Sales. Exp. -0.2%.
  • 13:30 US Core PPI. Exp. +0.1%.
  • 15:00 US Business Inventories. Exp. +0.5%.
  • 19:00 US FOMC Meeting Minutes.

For more events and lines, see the Euro to dollar forecast

EUR/USD Sentiment

  • Greek bailout saga continues: European finance ministers and the IMF met in Brussels on Monday, but failed to reach an agreement on Greece’s long-term debt. Without a deal, no further funds can be released to Greece under the bailout agreement. The finance ministers agreed to give Greece a two-year extension, until 2016, to reduce its deficit to 2% of GDP. The EuroGroup also decided to postpone a decision on the next tranche of aid until November 20. Greece has warned that it will run out of funds by November 16,so it’s not a pretty situation. The rumor mill is in full gear, with a report in the German newspaper Bild that Greece could receive one lump sum payment of some 44  billion euros. This would certainly ease the situation in Greece and bolster the euro as well.
  • Greek parliament approves budget: The Greek parliament voted Sunday to approve the government’s 2013 budget. The budget contains harsh austerity measures required for Greece to receive the next tranche of aid under the bailout package. The close vote (167-128) underscores the deep opposition to the budget, which raises taxes and the retirement age, and reduces the salaries of many public workers. Despite the vote, the troika is still unwilling to release more funds, which could complicate things for the already beleaguered Greek government.
  • Euro under pressure: Recent developments have not been kind to the European currency, which has been hit by the triple whammy of the Greek crisis, weak Euro-zone data (particularly in Germany) and the US fiscal cliff crisis. Greece is still waiting for more funds, as the EuroGroup and IMF continue to delay making a decision. The fiscal crisis in the US is hurting market sentiment, and the crisis in Spain hasn’t improved, although it hasn’t been dominating the headlines lately. The euro has been flirting with the psychological 1.27 level, and if the Greek situation spins out of control. we’re likely to see the currency take a tumble against the dollar.
  • Fiscal cliff crisis looming in US: The so-called fiscal cliff could occur at the end of the year, when tax breaks are set to expire at the same time that government spending cuts are scheduled to take place. Congress and President Obama will have to reach some compromise, otherwise the US could be hit with a recession in 2013. There are three choices that lawmakers can deal with the fiscal cliff, none of which are particularly palatable. We can expect some tough, protracted negotiations between the Republicans and Democrats, as lawmakers scramble to reach a compromise and find a solution to the crisis.
  • Will Greece remain in the Euro-zone?: Since the debt crisis hit, this question has often been asked, but such a scenario is certainly a realistic possibility. With Greece facing tremendous political and economic problems, the country’s membership in the Euro-zone seems to be getting more and more tenuous. Recent EU Summits and Euro-group meetings have not led to any breakthroughs, and an agreement on additional funds for Greece remains elusive. Both Greece and Germany may have reached their limits, and there are several other reasons why we could see a Grexit. Time is becoming more and more critical, as Greece is likely to run out of money sometime in November without further aid. The uncertainty will likely keep up pressure on the weakening euro.
  • German economy in trouble: The numbers out of Germany are a cause for great concern, as recent economic releases have been dismal, for the most part. Unemployment is up, and PMI data continues to point to ongoing economic contraction. Industrial Production recorded a 1.8% drop, its worst performance since June. The highly-respected ZEW Economic Sentiment had a very poor November reading, and the indicator has been mired in deep negative territory since June. The weak numbers are not just bad for the euro, but could also complicate efforts to provide aid to Greece and Spain. A sputtering German economy spells deep trouble for the both the Euro-zone and the wobbly euro.
  • Separation anxiety grips Spain: The government in Madrid is feeling better about itself, and has opted not to ask for a bailout. However, the separatist winds are getting stronger, with Catalonia holding elections on November 25. The independence movement is enjoying growing support, as many Catalans are unhappy about propping up other regions will they are forced to make cuts and as the central government for aid. However, the central government has balked at giving Catalonia more of a say in its finances, which has only served to fan the separatist flames. If the pro-independence parties win the upcoming election, we could see a backlash from Madrid.
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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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