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Euro dollar  is making some efforts to recover after starting with a gap and diving to a 7 month low. The growing fears about a messy Greek default and the implications for banks weigh heavily on the common currency.

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

EUR/USD Technicals

  • Asian session: A very hectic session saw the pair start 50 pips lower than the close on Friday, fall to 1.3550 and recover, but without closing the gap..
  • Current range: 1.3570 to 1.3630EUR USD Chart September 12 2011
  • Further levels in both directions: Below  1.3570, 1.3510, 1.3440, 1.3350, 1.3250.
  • Above:  1.3630, 1.3750, 1.3838, 1.3950, 1.4030
  • The really critical line of support is 1.3440. Lines before this one are minor.
  • The 1.3630 to 1.3650 area, where the Sunday gap lies, is serious resistance now.

Euro/Dollar licking its wounds  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 20:00 US FOMC member Richard Fisher talks. Hawkish tone likely.

* All times are GMT.

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

EUR/USD Sentiment

  • Greek default getting closer: One German minister said that a Greek default isn’t “taboo”. While more senior figures say that a default is bad and that Germany is working to avoid it, the German finance ministry is already working on plans to bail out the banks in two scenarios of a Greek default: one with Greece remaining in the euro zone, and another with Greece out of it.
  • Last minute effort by Greece: The Greek Prime Minister needed a lot of security forces to protect him during a speech on Saturday. He said that Greece has done enough. On Sunday, his finance minister laid out a plan to impose a property tax that would close the 2 billion euros gap that the country has. Will it pass? Greeks are quite unhappy with this.
  • Banks in trouble: Also French banks are trying to calm investors. After BNP Paribas issued a statement last week, Societe Generale, which is heavily leveraged, released an unusual statement in an effort to calm investors. Bank shares in all of Europe are plunging. This weighs on the euro as well.
  • Trichet significantly lowers forecast: The president of the ECB said that there are downside risks to growth and no inflation risks. This is a significant change. He refused to discuss rate cuts, in a long and somewhat amusing press conference. See Trichet’s highlights. All in all, he took the euro one leg lower during the speech. The pair continued south afterward.
  • Obama announces job plan: The president of the US laid out his jobs plan, worth $447 billion. The funding for the program will be presented this week, and it is uncertain if it will pass. Impact on currencies was minor.
  • Lower chance of QE3    US ISM Non-Manufacturing PMIcame out better than expected  and lowered the expectations for QE3. Bernanke said he has a set of tools, but didn’t provide specifics. It seems that “Operation Twist”, lowering long term yields is the preferred action by the Fed.
  • Swiss sugar rush: The SNB decided to set a floor of 1.20 in EUR/CHF in order to help the economy. In the meantime, this move is enjoys a really great success. A high value of EUR/CHF above the 1.20 floor allows for more falls in EUR/USD.
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