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Euro dollar  is dropping within range after the hopes that China would save Italy are meeting reality once again. Germany is still officially keen to prevent a Greek default, but the market thinks differently and sees it as imminent. Will the pair break lower?

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

EUR/USD Technicals

  • Asian session: A quiet session sees the pair range between 1.3630 and 1.37 before sliding in the European session
  • Current range: 1.3570 to 1.3630EUR USD Chart September 13 2011
  • Further levels in both directions: Below  1.3570, 1.3510, 1.3440, 1.3350, 1.3250.
  • Above:  1.3630, 1.37, 1.3788, 1.3838, 1.3950, 1.4030
  • The really critical line of support is 1.3440. Lines before this one are minor.
  • The round number of 1.37 emerges as key resistance in the current range.

Euro/Dollar sliding in range  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 5:30  French CPI. Exp. +0.3%. Actual +0.5%.
  • 12:30 US  Import Prices. Exp. -0.7%.
  • 14:00 US  IBD/TIPP Economic Optimism.
  • 18:00 US  Federal Budget Balance. Exp. -126 billion.

* All times are GMT.

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

EUR/USD Sentiment

  • China will save Italy?: We’ve heard about Chinese aid to struggling European countries many times in the past. While they do invest in some bonds, the Chinese efforts seem to big for Italy. A rally seen yesterday was limited and is now fading away.
  • Greece close to getting next trnche: The Greek finance minister laid out a plan to impose a property tax that would close the 2 billion euros gap that the country hasEUR USD Chart September 13 2011. Will it pass? Greeks are quite unhappy with this, but this could secure the next tranche of aid. CDS Spreads show a 98% chance of a Greek default. .
  • Germany getting ready for future Greek default: German chancellor Angela Merkel is officially working to prevent a Greek default. 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.  Also the Austrian finance minister says that “anything is possible” regarding Greece.
  • 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. Moody’s is expected to announce the results of the rating review this week, and these banks will likely receive a downgrade.
  • 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. . 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      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 as QE3 will be hard to pass through growing dissent in the FOMC, in addition to previous limited success.
  • 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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