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Euro dollar  is now in an even narrower range towards the second EU Summit later in the day. There are big doubts if any meaningful decisions will come out of this decision. Some numbers are set to be absent and yet another summit is on the cards. We have important US figures as well today.  

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

EUR/USD Technicals

  • Asian A quiet session with little change within the range.
  • Current range: 1.39 to 1.3950.EUR/USD Chart October 26 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

  • 6:00  German Import Prices. Exp. +0.5%. Actual +0.6%.
  • 11:00 German Chancellor Angela Merkel talks in the German Bundestag.
  • 12:30 US  Durable Goods Orders. Exp. -0.7%. Core exp. +0.5%.
  • 14:00 US New Home Sales. Exp. 302K.
  • 16:00 EU leaders meeting (all 27 members).
  • 17:15 onwards: Euro-zone leaders meeting (17 members)

* All times are GMT.

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

EUR/USD Sentiment

  • EFSF talks stuck: This seems the biggest open issue for the second EU summit  and might require another summit, after the G-20 summit next weekend. There are reports about a €1 trillion agreement. The markets will be more satisfied with €2 trillion. In any case, it seems that France gave up on convincing Germany to use the ECB in this process. A different, more complicated model will likely be used, making the solution being far from comprehensive. Perhaps no numbers will be presented, and this will disappoint the markets.
  • Greek haircut:  France is ready for a 50% haircut for bondholders. Germany wants 60%. Banks are “volunteering” for a 40%. These gaps will likely be bridged. This means a big burden on Greek banks. Some Greek citizens aren’t waiting for the Greek banks to go bust but are accelerating the process with a bank run.
  • China vs. EU PMI: 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. For the whole of the euro-zone, PMIs fell, showing a growing chance of recession. The market clings to summit hopes at the moment.
  • 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. We will get more important figures today and tomorrow
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