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Euro dollar  good moody again after a mini-summit in Frankfurt failed to produce the necessary headlines and hope for a grand plan in the bigger summit on Sunday. Some of the proposes may be a violation of the Maastricht treaty. It’s trending lower within a channel. Protests in Greece continue as the parliament is set to approve yet more austerity measures. Later we have key US figures.

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

EUR/USD Technicals

  • Asian The pair deteriorated gradually and eventually lost the minor line of 1.3725..
  • Current range: 1.3650 – 1.3725.EUR USD Chart October 20 2011
  • Further levels in both directions: Below  1.3650, 1.3550, 1.35, 1.34, 1.3360, 1.3285.
  • Above:    1.3725, 1.38, 1.3838, 1.39, 1.3950, 1.4030, 1.4160, 1.4282.
  • Note the downtrend channel which accompanies  the pair. It’s quite wide.
  • 1.3650 is an important cushion for the current range.
  • 1.38 is only a minor line before 1.3838, which is also becoming weaker.

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

EUR/USD Fundamentals

  • 7:00  German PPI. Exp. +0.2%. Actual +0.3%.
  • 12:30 US  Unemployment Claims. Exp. 400K. See how to trade this event with EUR/USD.
  • 14:00 US  Philly Fed Manufacturing Index. Exp. -9 points.
  • 14:00 US  Existing Home Sales. Exp. 4.94 million.
  • 14:00 US  CB Leading Index. Exp. +0.3%.
  • 14:00 European Consumer Confidence. Exp. -20 points.

* All times are GMT.

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

EUR/USD Sentiment

  • EFSF limitations: After the British Guardian reported about an agreement to boost the lending capability of the EFSF bailout fund to 2 trillion, denials followed. More recent reports talk about a firepower of only 1 trillion euros, and this may be a violation of the Maastricht treaty. But in any case, they will have to come up with something towards the summit on Sunday, October 23rd, before the bigger G-20 summit which begins on November 3rd. This fits perfectly well with  The Plan  of a Greek default at the beginning of November.
  • Greek parliament set to approve more austerity: A two-day general strike, and massive protests of which some turned violent will not stop the parliament from approving more austerity. The government seems to have a strong majority. Also in Greece, a report that 200 billion euros had fled the country adds pressure on the banking system, which has a shortage in cash and is exposed to Greek sovereign debt.
  • Rating downgrades continue: After Moody’s slashed Spain’s credit rating to A1, more than expected, also Slovenia got a downgrade. The are still clouds above France’s perfect AAA rating, as aid to its leveraged banks looms over Europe’s second largest country.
  • Trouble in Portugal: Spain’s neighbor has a significant hole in its budget which it is now trying to fix. This sounds too familiar to Greece.
  • China adds cold water: Yet again, the hopes that China will save Europe fade out. The Chinese foreign minister said that  the  EU Debt Crisis Should Be Handled As A “Self Remedy”.
  • No US recession: The excellent retail sales report from the US convinced many that the US will avoid recession, at least in Q3.  QE3 in the US isn’t likely. While producer prices topped expectations, consumer prices didn’t surprise, but have shown that inflation isn’t running away. Today’s double release at 14:00 GMT will rock currencies, especially if both figures take the same direction.
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