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Euro dollar  is now looking to consolidate in a low range after a terrible beginning to the new quarter. With another delay in the next tranche of Greek aid and the emergency at the French/Belgian bank Dexia, hope is hard to find. The heads of both central banks will testify today.

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

EUR/USD Technicals

  • Asian session: A relaxed session followed the 200 pip seen earlier. New lows were reached later.
  • Current range: 1.3145 to to 1.3225.EUR USD Chart October 4 2011
  • Further levels in both directions: Below  1.3145, 1.3080, 1.30, 1.2873, 1.25.
  • Above:  1.3225, 1.3313, 1.3360, 1.3430, 1.35, 1.3550, 1.3630, 1.37,
  • 1.3145 is the fresh low, but only a stepping stone. Very strong support is only at 1.2873, the YTD low.
  • 1.3313 turns into significant resistance.

Euro/Dollar in fresh lows  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 9:00 Euro-zone PPI. Exp. =0.2%. Actual -0.1%.
  • 13:00 ECB president Jean-Claude Trichet testifies. This happens two days before his last rate decision.
  • 13:00 US FOMC member  Sarah Bloom Raskin talks.
  • 14:00 US Federal Reserve Chairman Ben Bernanke testifies.  

* All times are GMT.

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

EUR/USD Sentiment

  • Greek tranche decision delayed again: After a 7 hour meeting, the head of the Euro-group, Jean-Claude Juncker announced a cancellation of the October 13th meeting that was supposed to approve the next tranche of aid for Greece. This is probably delayed until mid November, as the “troika needs more time. According to sources in Greece, the country will run out of money in mid October. Others say mid November. Uncertainty is high. This strengthens the theory of a Greek default at the beginning of November, and by then, banks will be ready.. According to the Belgian finance minister, Greece has money until mid November. Belgium has problems of its own.
  • Euro crisis expands: Dexia, a large French-Belgian bank has severe funding problems that threatens to destabilize the whole system. This joins calls for a Greek default and rumors that the Greek PM will resign. This gloom, recapped here, intensified and pushed the euro much lower.
  • No Multi-trillion bailout fund?:  The hopes of leveraging the bailout fund (EFSF) are winding down as the denials become louder and louder. While German lawmakers provided a wide approval for the new EFSF powers, the message is that this is the last approval.
  • China is landing – soft or hard?: While official manufacturing PMI is OK, there are growing worries about a real estate bubble burst. This is amplified by more and articles. The US dollar strengthens on safe haven flows.
  • More cautious optimism in the US: While the focus remains  on the European debt crisis, US Manufacturing PMI provided a small upwards surprise. It included an upbeat employment component, which is a positive sign for Friday’s Non-Farm Payrolls.