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Euro dollar  challenged the top border of the range without success. Greece revised its deficit figures once again. On the other hand, Italian yields are kept under 7%, courtesy of the ECB. Will the central bank step up its efforts? The crisis is at the foot of German bonds now. As no significant US figures are released today, the crisis will have all the stage for itself at the end of this week.

Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: A quiet session saw the pair climb, but remain bound to the 1.3550 line.
  • Current range:  1.3480 to 1.3550.EUR USD Chart November 18 2011
  • Further levels in both directions: Below   1.3480, 1.3420, 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.
  • 1.3480 is a pivotal line within the range – important support is at 1.3420.

Euro/Dollar erases recovery- click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:00  German PPI. Exp. +0.1%. Actual +0.2%.
  • 13:15 US FOMC member William Dudley speaks. Dovish tone expected.
  • 15:00 US  CB Leading Index. Exp. +0.5%.
  • 18:15 US FOMC member Richard Fisher talks. Hawkish tone expected.

* All times are GMT.

For more events later in the week, see the Euro to dollar forecast

EUR/USD Sentiment

  • Greek deficit higher: The debt struck country released an update on the 2011 government deficit: yet again, it is higher than reported in October. The  picture  is more optimistic for 2012, but this is pending revisions of course. When taking the haircuts into account, the picture doesn’t improve too much.
  • Wolves closing in on Germany: Only German bonds are really “safe” in Europe as the bond rout is spreading. But also Germany cannot stay immune. When the benchmark breaks, this will trigger a much bigger euro-crash. In addition, Jean-Claude Juncker, head of the euro-group, said that German debt levels are worrying, and that they are “larger than Spain”.
  • Euro/dollar swap like in 2008:  The cost of swapping euros to dollar’s continues rising, and shows that banks continue paying a dear price for dollars. This is a reminder of 2008 and very worrying for the whole system.
  • Spain needs aid?:  German/Spanish spreads reached 460 basis points, just before elections are held in the euro-zone’s fourth largest country this Sunday. There are reports that Spain’s designated prime minister, Mariano Rajoy, has  negotiated  â‚¬100 billion of aid with Angela Merkel. 10 year yields cross the 6.50% line.
  • Italian trouble:  The euro-zone’s third largest country delayed its GDP release. Does it have something to hide? The CEO of Unicredit, one the biggest banks, went to Frankfurt to meet with the ECB and ask for easier credit 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 and consumer prices fell. The NY Fed Index and industrial production came above expectations. Also weekly jobless claims provided room for optimism, and only the relatively weak Philly Fed Index ruined the party.
  • 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.