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Euro dollar  started off the week very quietly in terms of movements despite a lot of headlines released this weekend regarding the European debt crisis, especially from the G-20 meetings. A 50% haircut for Greece now seems a mainstream option, and so does a boost of the bailout fund. Tension will rise towards the next European summit on the upcoming weekend. Will the pair hold on to recent gains?

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

EUR/USD Technicals

  • Asian session: A very quiet session for a Monday saw the pair trading in a narrow range.
  • Current range: 1.3838 to 1.39.EUR USD Chart October 17 2011
  • Further levels in both directions: Below 1.3838, 1.38, 1.37, 1.3630, 1.3550, 1.35, 1.34, 1.3360, 1.3285.
  • Above:   1.39, 1.3950, 1.4030, 1.4160, 1.4282.
  • 1.39 is only minor resistance before 1.3950, and more importantly 1.4030.
  • 1.3838 remains a key line, but has switched its role to support.

Euro/Dollar trades quietly on high ground  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 12:30 US  Empire State Manufacturing Index. Exp. -3.9 points.
  • 13:15 US  Industrial Production. Exp. +0.2%.
  • 13:15 US  Capacity Utilization Rate. Exp. 77.5%

* All times are GMT.

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

EUR/USD Sentiment

  • A 50% Greek haircut coming: The German finance minister joined the chorus calling for a larger haircut for Greece. The CEO of Deutsche Bank is reportedly negotiating a 50% haircut.
  • New deadline: The G-20 finance ministers discussed the debt crisis and talked about presenting a comprehensive plan by October 23, when European leaders meet, and celebrating it on the first week of November, when G-20 heads of state meet  .  This fits perfectly well with  The Plan  of a Greek default at the beginning of November.
  • Greece: no aid yet, but strikes ahead: The technical staff of the troika released its report. There is no clear approval of the next tranche of aid, but the assumption is that this will eventually happen. In the meantime, the parliament in Athens is set to approve new measures on Thursday. A general strike awaits them on Wednesday and Thursday.
  • Will the US avoid recession?: The excellent retail sales report from the US convinced many that the US will avoid recession, at least in Q3. Today we have second tier figures. More important figures are expected later in the week.
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