EUR/USD Oct. 1 – Two Steps Down, One Step Up

EUR/USD  kicked off the new quarter with a dip to lower ground, but was able to recover some of its losses and reach resistance. The picture of the the global economy is not pretty anywhere. Fresh European data was only marginally better than expected. We will get the first hint for the Non-Farm Payrolls and some words from Bernanke later on.

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

EUR/USD Technical

• Asian session: Euro/dollar fell to test lower support at 1.2814 before recovering in the European session and testing 1.29.
• Current range: 1.2814 to 1.2900.

Further levels in both directions:    

• Below: 1.2814, 1.2750, 1.2670, 1.2624, 1.2587, 1.2520 and 1.2460.
• Above: 1.2900, 1.2960, 1.30, 1.3060, 1.3105, 1.32, 1.3290, 1.34, 1.3437, 1.3480 and 1.3540.
• The round 1.2900 caps any upside movements.
• 1.2814 is the next support level.

Euro/Dollar  under ticks lower – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:15  Spanish Manufacturing PMI. Actual 44.5.
• 7:45  Italian Manufacturing PMI. Exp. 44.1. Actual 45.7 points.
• 8:00  Final Manufacturing PMI. Exp. 46. Actual 46.1 points.
• 9:00  Unemployment Rate. Exp. 11.4%. Actual 11.4%.
• 13:00 Markit  Final Manufacturing PMI. Exp. 51.5 points.
• 14:00  ISM Manufacturing PMI. Exp. 49.8 points.
• 14:00 US  Construction Spending. Exp. +0.6%.
• 16:00 US FOMC member  John Williams talks.
• 16:30 US Federal Reserve Chairman Ben Bernanke talks.  

EUR/USD Sentiment

• Troika Returns to Greece: Germany’s opposition leader and former finance minister called for giving more time to Greece. Will this impact Greece’s creditors? With the troika showing some flexibility over Greek repayments, there is hope for some good news, which will later require the approval of coalition partners.   Talks about a  third bailout program  became more loud in recent days, as Greece is nowhere close to meeting targets. There are news reports out of Greece that  the  sides are further apart than they are saying publicly, and that the IMF is unhappy providing more funds to Greece at this point in time. A meeting of European finance ministers is set for October 8th, and could be seen as a deadline to accelerate the talks.
• Will the Spanish budget prevent a bailout?: This is what Madrid is clearly hoping for, after presenting more austerity measures. A preliminary approval was later given by EU Commissioner Olli Rehn. The budget and the statements helped Spanish yields fall. The bank stress tests showed that the funding needs would be 59.3 billion euros in an adverse scenario – not really that bad. The problem is the lack of trust.  Spain might have to find money for the banks on its own, after  finance ministers from Germany, the Netherlands and Finland declared that bank supervision and bank bailout would only come for new banking problems and not for legacy ones. Thus, the agreements in the June 2012 EU Summit regarding a banking bailout for Spain seem null and void. Breaking the link between sovereigns and banks was a key value less than 3 months ago, and now it is gone.
• Spanish separatism grows:  After setting a date for elections (Nov. 25th), the northeastern region of Spain passed a motion for independence. This was met with anger by the central government and raised bad memories from the past. With the economic situation deteriorating, both sides find it hard to find a compromise. And now, also the Basque Country sees more calls for independence, despite enjoying a more favorable economic model.
• US Economy – Direction Unknown: The downwards revision of Q2 GDP was quite depressing and showed that the US economy is at stall speed. However, improvement from housing and a surprising drop in jobless claims are positive points. The PMIs and ADP’s report build up the expectations towards the all important Non-Farm Payrolls on Friday.

Further reading:  5 Most Predictable Currency Pairs – Q4 2012