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The EUR/USD was  steady as German and  French GDP  for  Q3 were both slightly  higher than the estimates. Although the two biggest economies in the EZ  recorded very modest growth of just 0.2%, the markets are happy to see any good news, given the dismal situation in the Euro-zone.  Italian and Euro-zone GDP both posted drops, but  also managed to  beat the forecast. In the US, the minutes of the Fed’s October policy meeting were released,  with  the Fed  hinting at further monetary easing measures in 2013.  There are three key releases out of the US – Core CPI, Unemployment Claims and the Philly Fed Manufacturing Index.

EUR/USD Technical

  • Asian session: Euro/dollar was steady, and consolidated around 1.2740. The pair  has inched higher  in the European session.
  • Current range: 1.2750 to 1.28.

Further levels in both directions:    

  • Below: 1.2750, 1.2690, 1.2624, 1.2590, 1.25, 1.2440, 1.2390, 1.2250, 1.2140 and 1.2042.
  • Above: 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, and 1.3170.
  • 1.2750 is  providing weak support  as the pair improves. 1.28 is the next line of resistance.
  • 1.2690 has strengthened on the downside.

Euro/dollar  steady  after  positive Euro-zone GDP data  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:30  French Preliminary GDP. Exp. +0.0%. Actual +0.2%.
  • 7:00  German Preliminary GDP. Exp. +0.1%. Actual +0.2%.
  • 9:00 ECB Monthly Bulletin.
  • 9:00  Italian Preliminary GDP. Exp. -0.4%. Actual -0.2%.
  • 10:00 Euro-zone CPI. Exp. +2.5%. Actual +2.5%.
  • 10:00 Euro-zone Core CPI. Exp. +1.5%. Actual +1.5%.
  • 10:00 Euro-zone Flash GDP. Exp. -0.2%. Actual -0.1.%.
  • 13:30 US Core CPI. Exp.+0.1%.
  • 13:30 US Unemployment Claims. Exp. 372K.
  • 13:30 US CPI. Exp. +0.1%.
  • 13:30 US Empire State Manufacturing Index. Exp. -7.2 points.
  • 14:00 US FOMC Member Jeffrey Lacker Speaks.
  • 15:00 US Philly Fed Manufacturing Index. Exp. +1.1 points. See how to trade this event with USD/JPY.
  • 15:00 US Mortgage Delinquencies.
  • 15:30 US Natural Gas Storage. Exp. -13B.
  • 16:00 US Crude Oil Inventories. Exp. 2.5M.
  • 18:20 US Fed Chairman Bernard Bernanke Speaks.
  • 23:30 US FOMC William Dudley Speaks.

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 earlier in the week, 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. Meanwhile the rumor mill is in full gear, with a the German newspaper Bild reporting 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 remains 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.
  • US grapples with fiscal cliff crisis: With the US election behind us,the looming fiscal cliff crisis is set to occur unless  US politicians can get their act together, and soon.  Fiscal cliff refers to a situation whereby tax breaks are set to expire at the same time that government spending cuts are scheduled to take place, starting at the end of 2012.  Congress and President Obama will have to reach some compromise over deficit reduction, otherwise the US could be hit with a recession in 2013.  Fresh from his electoral victory, President Obama  has fired the opening shot,  demanding that Republicans accept a plan that  would raise $1.6 trillion in new taxes over the next  10 years. The Republicans are sure to reject this proposal.  With  both sides digging in  their heels, we could  be in for  a nasty, protracted  fight  between Congress and the president.    
  • Greek turmoil could lead to Grexit: With Greece facing tremendous political and economic problems, the country’s membership in the Euro-zone is in jeopardy. 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. The German economy is in trouble, and many politicians and senior officials are not happy about coughing up more funds for Greece. Is Germany playing with fire? 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 wobbly euro.
  • Independence winds blowing in  Spain: The government in Madrid is feeling better about itself,  so much so that it has decided to only request a bailout “when the time is right”.  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. For its part, 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.