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Euro dollar  starts the week on a high note, enjoying hopes that Greece will receive aid and that Merkel and Sarkozy are finally tackling the crisis seriously. In addition, economic indicators from Europe all exceeded expectations for a change. The action is expected to calm down later on, as North American markets are closed today.

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

EUR/USD Technicals

  • Asian session: A active session saw the beginning of the upwards move, despite a holiday in Japan.
  • Current range: 1.3550 – 1.3630.EUR USD Chart October 10 2011
  • Further levels in both directions: Below 1.3550, 1.35, 1.34, 1.3360, 1.3285, 1.3225, 1.3145,
  • Above:  1.3630, 1.37, 1.3750, 1.3838, 1.3950, 1.4030.
  • Note the uptrend resistance, now close to the price.
  • 1.37 is the more important resistance line.
  • There is lots of room for downside consolidation now.

Euro/Dollar in rising channel  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00  German Trade Balance. Exp. 9.8 billion. Actual 13.8 billion.
  • 6:45  French Industrial Production. Exp. -0.7%. Actual +0.5%.
  • 8:30 Europe Sentix Investor Confidence. Exp. -19.2. Actual -18.5 points.

* All times are GMT.

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

EUR/USD Sentiment

  • Merkel-Sarkozy pledge solutions: While no concrete details were released, the leaders of Germany and France decided on Sunday to get the banks in order and also find some more comprehensive solution for Greece. Both countries were reportedly at odds about the way banks should be  recapitalized. There are talks of a very unsurprising due date: the first week of November. This fits perfectly well with The Plan.
  • Greece going to get aid soon?: During the weekend there were many contradictory reports about the talks of the troika in Greece. Eventually, the optimistic reports have gained ground, and an official announcement is expected this week. It is still to be seen.
  • Dexia split up moving fast: The Franco-Beligan bank, which was dubbed “the first victim of Greece” is being split up and guaranteed by the respective countries. It could be a model for more banks, unless Sarkozy and Merkel provide some other plan.
  • Italy and Spain downgraded: The upwards move of the euro now comes on the back of a downfall on Friday, when Fitch downgraded both countries.
  • No Surprises from Trichet: The last rate decision and press conference from Jean-Claude Trichet were very much within expectations. Some members of the ECB probably wanted to cut the rates, but the hawkish stance won over. The ECB pledged to provide liquidity to banks, at a time when they need it. All in all, it was a euro-positive event, especially after the BOE decided on a massive expansion to its QE program.
  • Non-Farm Payrolls surprise: Finally some good news from the US: 103K jobs were gained and the previous month’s flat number was revised to the upside. This helped the relief rally.
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