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Euro dollar  opened with a big gap lower under the channel and is now extending the fall and reaches another support line. Greece and the EU / IMF drift further apart from agreeing on conditions for the next tranche of aid. Will Greece say no to further austerity and default? The question is in the air.

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

EUR/USD Technicals

  • Asian session: An active session saw a 100 pip gap lower exactly under the lower band of the channel. The falls continued below 1.37 afterwards.
  • Current range: 1.3630 to 1.37.EUR USD Chart September 19 2011
  • Further levels in both directions: Below    1.3630, 1.3570, 1.3510, 1.3440, 1.3350, 1.3250.
  • Above:  1.37, 13788 1.3838, 1.3788, 1.3838, 1.3950, 1.4030, 1.41, 1.4160, 1.4220 and 1.4282
  • The uptrend channel that was broken to the upside is now broken to the downside
  • Very important support is still far, at 1.3440. There are many small steps before this point.
  • 1.37 is weak resistance before 1.3838.

Euro/Dollar extends the gap losses  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 14:00 US  NAHB Housing Market Index. Exp. 15 points.
  • 16:00 Troika / Greece conference call. Headlines coming out of this call will likely be optimistic.

* All times are GMT.

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

EUR/USD Sentiment

  • Troika makes 15 conditions: The EU / ECB / IMF troika laid out fresh demands from Greece, in order to release the next tranche of aid €8 billion. Last week it already seemed closer with the proposed property tax. This came after talks in Poland ended with disagreement. Among these demands, is a cut of 100K jobs in Greece. Will Greece accept this? Will the Greek people accept it?
  • German  euro skeptics beaten: Elections in Berlin had one clear result – the euro skeptic FDP    party, a coalition member of Merkel’s party, was beaten. The left wing parties, who are fully committed to the euro, were successful. This contradicts the anti-euro sentiment heard about Germany lately.
  • Low chance of QE3: The focus is still at Europe, but it will shift towards Wednesday’s highly anticipated rate statement in the US.  Inflation is still significant, and lowers the chance of an announcement of more QE in the upcoming FOMC meeting. The Fed might launch creative steps, but it already made it clear that the ball is in the court of the government. A powerful move by Bernanke means a weaker dollar.
  • Dollar Liquidity Move Boosts the Euro: The dramatic announcement by 5 central banks to provide longer dollar liquidity for European banks provided a big relief for the euro, while the euphoria is fading out. Could this be a preparation for the Big Greek Default?
  • Obama suggest budget cuts: In order to counter the jobs bill, the US president will lay out his suggestions for budget cuts. A disapproval for these measures will weaken the dollar.
  • Bearish forecasts: Pimco sees EUR/USD falling to 1.20 in the next 3-6 months. Deutsche Bank sees 1.30 in the next few months.
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