Euro dollar started the week lower, getting close to the bottom border of the range. In Spain, the center-right PP party won a landslide victory and has a mandate for austerity. This doesn’t cheer the markets. France’s perfect AAA is now endangered, and yields remain high. More significant bond buying action from the ECB is still awaited.
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 float under 1.3550. The drop began in the European session.
- Current range: 1.3480 – 1.3550.
- Further levels in both directions: Below 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 leans lower- click on the graph to enlarge.
EUR/USD Fundamentals
- 9:00 Euro-zone Current Account. Exp. -3.2 billion. Actual +0.5.
- 15:00 US US Existing Home Sales. Exp. 4.82 million. See how to trade this event with USD/JPY.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- Decisive result in Spain: The center-right PP party won a landslide victory in Spain’s general elections: 186 out of 350 seats in parliament – an absolute majority that will allow make decision making easy. The party won every region, apart from Catalonia and the Basque Country. Will regional tensions rise following these elections? There are reports that Spain’s designated prime minister, Mariano Rajoy, has negotiated €100 billion of aid with Angela Merkel. 10 year yields remain high after last week’s bad bond auction.
- Moody’s discusses France: The rating agency discussed the rising borrowing costs of France, and hinted that this could cause a credit downgrade. If France loses its AAA rating, also the EFSF bailout fund will follow.
- 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”. When will the ECB act?
- 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.
- 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.
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