EUR/USD is trading above 1.31, consolidating the huge gains made in the previous week. The ECB clarified that it is ready to use the OMT, and that it wan’t only a “bazooka”. Spain is still enjoying lower yields. Will it ask for an aid request only when the markets turn against it? Spain will test the markets later on in the week. Regarding Greece, there’s a bit more hope that some deal for extending the timetable could be reached – a deal that will not involve additional payments. Markets are still digesting the very aggressive monetary easing measures seen last week.
Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.
- Asian session: Euro/dollar started the week without a weekend gap and slid a bit.
- Current range: 1.3105 to 1.312.
- Below: 1.3105, 1.3060, 1.30, 1.29, 1.2814, 1.2750, 1.2670, 1.2624, 1.2587, 1.2520 and 1.2460.
- Above: 1.32, 1.3290, 1.34, 1.3437, 1.3480 and 1.3540.
- 1.30 turns into support, but 1.2960 should be noted.
- 1.3060 is an important line. A break higher could result in a fast rally.
Euro/Dollar above consolidating – click on the graph to enlarge.
- 8:00 Euro-zone Current Account. Exp. 10.9 billion. Actual 9.7 billion.
- 10:00 Euro-zone trade balance. Exp. 10.2 billion. Actual 7.9 billion.
- 12:30 US Empire State Manufacturing Index. Exp. -1.9 points.
- QE3 Echoes : On Thursday, it finally happened: the Fed launched an open ended program worth $40 billion dollars of monthly buys of MBS in order to help the housing sector, but also to encourage lending. This comes in addition to extending the low rates guidance to 2015 and continuing the existing Twist program worth $45 billion a month. This aggressive easing was later justified by Bernanke, who also said that the Fed is looking at the general picture of unemployment (including the participation rate). Apart from the yen, all currencies gained against the greenback.
- Spain still didn’t ask for help: An ECB official made it clear that the OMT program is going to be utilized and isn’t only a threat. This depends on a Spanish request for a bailout, using the ESM. In turn, the ESM was approved – Germany’s Constitutional Court upheld the legality of the European Stability Mechanism as it stands for Germany, with some conditions. Spain is now enjoying lower yields after all these positive news. However, there’s still a lot of time until Thursday’s important bond auction. Spain’s problems cannot be swept under the carpet. Bankia is a black hole for money, and the deterioration of the crisis also aided the separatists in Catalonia. The streets of Barcelona were flooded with people calling for independence.
- Greece likely to get more time: Various EU officials have hinted flexibility regarding Greece’s schedule, stressing it doesn’t mean more money. Greece’s three coalition partners are still unable to agree on new austerity, as the economy continues to contract. In the meantime, anti-austerity parties have gained in the polls, and dismal unemployment figures worsened, as the unemployment rate rose to a staggering 24.4%, up from 23.5%. The government has no easy task in trying to implement cuts of 11.5 billion euros, which is necessary in order to received further bailout payments. Talks about a third bailout program became more loud in recent days, as Greece is nowhere close to meeting targets.