Euro dollar made a sharp move higher but quickly fell after hitting resistance. Everybody is looking for the ECB to save the day: Spain, France and Italy’s Unicredit all seek help. Is European QE around the corner? We have more important US figures after yesterday’s positive ones.
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 saw the pair fall to a new low at 1.3429, the lowest in a month. The European session sees a climb to 1.3550 before the pair fell once again.
- Current range: 1.3430 to 1.3480.
- Further levels in both directions: Below 1.3430, 1.3360, 1.3250, 1.3145 and 1.30.
- Above: 1.3480, 1.3550, 1.3650, 1.3725, 1.38, 1.3838.
- Stronger resistance is now found at 1.3550 as the pair is lower.
- After 1.3480 was broken, 1.3430 is only weak support on the road lower, all the way to 1.3145.
Euro/Dollar erases recovery- click on the graph to enlarge.
EUR/USD Fundamentals
- 10:00 Euro-zone CPI. Exp. 3%. Core exp. 1.6%. Actual exactly as expected.
- 13:30 US CPI. Exp. 0%. Core exp. +0.1%.
- 14:00 US TIC Long-Term Purchases. Exp. 63.4 billion.
- 14:15 US Industrial Production. Exp. +0.4%.
- 14:15 US Capacity Utilization Rate. Exp. 77.6%.
- 15:00 US NAHB Housing Market Index. Exp. 17 points.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Unicredit talking to the ECB: One of Italy’s biggest banks reported a huge loss, after writing down sovereign debt. And now, there are reports that it is seeking easier funding from the European Central Bank.
- France wants stability from the ECB: A spokesman of the French government said “France is confident that the ECB will take the necessary measures to to ensure the financial stability of the euro-zone”. In other words: Help! French yields are double than German yields.
- Spain needs aid?: Spanish yields are off their highs, but the situation remains tense as funding costs can push the zone’s fourth largest economy into a bailout package. There are reports that Spain’s designated prime minister, Mariano Rajoy, has negotiated €100 billion of aid with Angela Merkel.
- Italian yields ease: After all yields (apart from German) were on the rise yesterday, they are easing now, with Italian yields under 7% (FOR NOW). A new government led by Mario Monti is expected to consist only of technocrats, but the hope will likely fade away. The ECB is buying Italian bonds, but not enough to send Italy back to sustainable lending levels. Remember that if the ECB doesn’t sterilize its bond buying, this is full QE, or euro printing, which can devalue the currency.
- No recession yet: The euro-zone didn’t enter a recession in Q3 according to the recent numbers, that came in line with expectations. It’s only important to note that the French economy contracted in Q2, contrary to no change initially reported.
- Yet more positive US figures: More good figures came out of the US: retail sales exceeded expectations while producer prices fell. The NY Fed Index was also good. More important inflation figures will be released today, and industrial production will provide another indication about growth.
- Political deadlock in the US: The debt ceiling is slowly creeping back. The November 23rd deadline for reaching a deal on long term debt reduction is getting closer, but the politicians are getting further away from each other. There’s only a week to go, and a failure might lead to a credit downgrade.
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