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Euro dollar  is settling in a lower range after hitting a 7 month low in the post Bernanke crash. An option of a big Greek haircut is floating around as the troika and the debt struck country are still  negotiating  . How will this wild week end?

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

EUR/USD Technicals

  • Asian session: This session saw some consolidation after the big downfalls seen earlier. Ranges are redefined
  • Current range: 1.3485 to 1.3550.EUR USD Chart September 23 2011
  • Further levels in both directions: Below    1.3485, 1.34, 1.3350, 1.3250, 1.3180.
  • Above:  1.3550, 1.3630, 1.37, 1.3750 1.3838, 1.3950
  • The new lows under 1.34 are significant support now, after the all important support of 1.3440 was shattered.  
  • 1.3630 is significant resistance on the upside.

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

EUR/USD Fundamentals

  • 13:00 Belgian  NBB Business Climate. Exp. -8.9 points.
  • 17:30 FOMC member William Dudley talks.

* All times are GMT.

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

EUR/USD Sentiment

  • G-20 and IMF talks: The current financial crisis comes at a time when leaders are busy at meetings. The G-20 meetings are still going on, but they already released a message about acting. This is quite general and action is needed in order to convince the markets.
  • Greek haircut / default on the cards: After already getting closer, the talks aren’t progressing towards a deal. The option of a 50% haircut on Greek debt was raised in Greece, and also an ECB official, Klaas Knot,  said this cannot be ruled out. This is the first such statement from someone at the European Central Bank. The Greeks are ready to accept more harsh measures as demanded by the troika in order to release the next tranche of aid €8 billion. . Among these demands, is a  cut of 100K jobs in Greece.  
  • Bernanke Doesn’t Deliver: The Federal reserve announced a $400 billion operation to twist the yield curve – lower long term interest rates and allow short term yields to rise. The disappointment comes from what is not in the statement: no lower interest on excess reserves, no inflation / growth targets and no signs whatsoever of QE3. This sent the dollar up across the board, and will continue to impact currencies for quite some time. Financial markets are still recovering from the crash.
  • French banks in trouble: Fresh reports show more pressure on French banks. The most outspoken person was Mohamed El-Arian of Pimco who said that there’s an “institutional bank run” on French banks.. All this joins the big dollar liquidity move announced by 5 central banks. There are initiatives that speak of recapitalization, but nothing has materialized yet.
  • More economic weakness: A big bulk of European PMIs and other figures such as industrial new orders and business sentiment all disappointed. A rate cut in October seems real.
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