EUR/USD Sep. 21 – Capped by Strong Resistance Despite

EUR/USD  managed to recover but could not breach the all-important 1.30 line. There are reports about progress in securing a deal between Greece and its international creditors. In Spain, the situation becomes more complicated as tensions between Catalonia and Spain rise. US indicators continue showing mediocre growth. Will the week end with a continued dollar strength?

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

EUR/USD Technical

• Asian session: Euro/dollar  continued to recover but could breach 1.30. It began falling during the European session..
• Current range: 1.29 – 1.2960

Further levels in both directions:    

• Below: 1.2960, 1.29, 1.2814, 1.2750, 1.2670, 1.2624, 1.2587, 1.2520 and 1.2460.
• Above: 1.30, 1.3060, 1.3105, 1.32, 1.3290, 1.34, 1.3437, 1.3480 and 1.3540.
• Note the downtrend resistance line which is clearly seen on the chart. It already has 4 points.
• 1.2960 has reverted to resistance as the pair loses ground. 1.30 is stronger.
• 1.29 is an important  support level.

Euro/Dollar down  after mixed PMI data  – click on the graph to enlarge.

EUR/USD Fundamentals

• 13:00 Belgian  NBB Business Climate. Exp. -11.1 points.
• 16:40 US FOMC member Denis Lockhart speaks.

EUR/USD Sentiment

• Pain in Spain:  Spanish officials continue to insist that they need more time to consider the conditions of a bailout request from the ECB. Perhaps they are encouraged by the better market conditions, seen  10-year Spanish Bond Auction – that was very successful.Some analysts have suggested that PM Mariano Rajoy would prefer to push the official request until after October 21,  due to internal calculations. An ECB official made it clear that the  OMT program  will be utilized and isn’t only a threat. Spain’s political and economic problems continue to worsen by the day. Bankia is a black hole for money, and the deterioration of the crisis is causing regional friction to flare up,  and a pro-independence rally in Barcelona drew huge crowds. A meeting between Rajoy and Catalan president Artur Mas ended in a total failure and Catalonia is now at crossroads, seeking information about the potential implications of a secession.
• Greece closer to deal? : After various EU officials have hinted flexibility regarding Greece’s repayment schedule, stressing it doesn’t mean more money, the Greek press reports on progress in talks that continued late into the night. After the troika backed down from some requests, there is hope for a quick conclusion of new measures, which will later require the approval of coaltion partners.    Talks about a  third bailout program  became more loud in recent days, as Greece is nowhere close to meeting targets.
• European recession looms: France saw a big plunge in its purchasing managers’ indices, and the German improvement was not enough to offset the drop. All in all, the euro-zone is contracting at a very fast pace, and this is worrying.
• Geopolitical tensions rising:  In China,  protests continued  against Japanese targets, forcing the closure of  Japanese factories and businesses. Souring relations between the world’s second and third largest economies could hurt the whole world. Tensions could rise in the UN General Assembly. The US is trying to calm tensions while standing behind Japan.
• QE3 effect waning off:  Last Thursday, Bernanke finally pulled the trigger: 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). Yet after a week, the dollar is making fresh gains, and there is growing notion that a) the move was priced in, and b) The worsening global outlook will aid the greenback.
• US data is mixed:  The housing sector  has  gained steam recently, and Existing Home Sales looked sharp, posting a figure of 4.82 million. However, jobless claims remain at stubbornly high levels, and the improvement in the Philly Fed Index still left it in the red.