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Euro dollar  managed to overcome a Sunday gap and is now moving higher, helped by strong Chinese data and by hopes. The first EU Summit made some progress but failed to reach a comprehensive agreement. There are still high hopes for Wednesday’s summit. The calendar is busy for a Monday. French Flash Services PMI disappointed and hurt the euro’s rally. German figures are mixed. All European numbers are a disappointment.

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

EUR/USD Technicals

  • Asian An active session saw EUR/USD gap lower and then close the gap and move north, capped by 1.3950…
  • Current range: 1.39 to 1.3950.EUR USD Chart October 24 2011
  • Further levels in both directions: Below  1.39, 1.3838, 1.38, 1.3725, 1.3650, 1.3550, 1.35, 1.3450, 1.3360.
  • Above:    1.39, 1.3950, 1.4030, 1.41, 1.4160, 1.4220, 1.4282.

  • 1.3950 is the final frontier before the round 1.40 number eyed by many. Note that strong resistance above this line appears at 1.4030.
  • 1.3838 now returns to its role as support.

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

EUR/USD Fundamentals

  • 7:00 French Flash Services PMI. Exp. 50.6 points. Actual 46 points. A bitter disappointment.
  • 7:00  French Flash Manufacturing PMI. Exp. 48.1 points. A small upside surprise.
  • 7:30  German Flash Services PMI. Exp. 49.8 points. Actual 52.1 points – impressive bounce.
  • 7:30  German Flash Manufacturing PMI. Exp. 50 points – Actual 48.9 points – fell into contraction zone.
  • 8:00 Euro-zone Flash  Services PMI. Exp. 48.6 points. Actual 47.2 points.
  • 8:00 Euro-zone Flash Manufacturing PMI. Exp. 48.1 points. Actual 47.3 points – both are a big disappointment. EUR/USD is under 1.39.
  • 9:00 European  Industrial New Orders. Exp. +0.1%.
  • 12:45 US FOMC member William Dudley talks. Dovish tone expected.

* All times are GMT.

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

EUR/USD Sentiment

  • EU Summit -partial progress made:  Intensive talks over the weekend in Brussels yielded an agreement to recapitalize the banks by €100 billion, an offer from the banks to accept a 40% haircut and no agreement on leveraging the EFSF. The progress that was made is far from being sufficient – far from being a comprehensive solution. The Irish Prime Minister and other speakers expressed satisfaction from the progress and lots of hope for an agreement Wednesday. An agreement seems likely, but the details might not be enough.
  • China growing nicely: The independent HSBC Manufacturing PMI surprised with a jump above 50 points to 51.1. This shows that China is still growing nicely and that a scenario of a “hard landing” isn’t too close. It also helps the euro.
  • US Situation Improving: The huge leap in the Philly Fed Index was great news, but with the current focus on the debt crisis, it was ignored. This joined the excellent retail sales report from the US convinced many that the US will avoid recession, at least in Q3.  QE3 is away from the table.
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