Euro dollar is cautiously making its way higher on a rising uptrend, fueled by hopes that the European bailout fund will be enlarged to battle any horrible scenarios. Will we see a break higher? Or is it yet another consolidation for the next drop as these hopes fail to play out?
Here’s a quick update on technicals, fundamentals and what’s going on in the markets.
- Asian session: The euro continued recovering in an active session, breaking out of the downtrend channel and continuing to rise on the rising uptrend.
- Current range: 1.35 to 1.3550.
- Further levels in both directions: Below 1.35, 1.3430,, 1.3385, 1.3322, 1.3250, 1.3180.
- Above: 1.3550, 1.3630, 1.37, 1.3750 1.3838, 1.3950
- The downtrend channel has been broken to the upside but the pair wants to get back to the channel.
- Note the uptrend support now.
- Attempts to break above 1.3550 didn’t really materialize.
- 1.3630 is significant resistance on the upside.
Euro/Dollar moving higher – click on the graph to enlarge.
- 6:00 German GfK Consumer Climate. Exp. 5.1. Actual 5.2 points.
- 8:00 Euro-zone M3 Money Supply. Exp. +2%. Actual +2.8%.
- 13:00 US S&P/CS Composite-20 HPI. Exp. -4.4%.
- 14:00 CB Consumer Confidence. Exp. 46.2 points. See how to trade this event with USD/JPY.
- 14:00 US Richmond Manufacturing Index. Exp. -8 points.
- 17:20 US FOMC member Richard Fisher talks. Hawkish tone likely.
* All times are GMT.
For more events later in the week, see the Euro to dollar forecast
- Multi-trillion bailout fund?: Following the IMF and G-20 meetings over the weekend, the creative idea of leveraging the bailout fund (EFSF) is gaining traction. This way, the fund will be able to safeguard Italy and Spain as well. This is helping the euro’s recovery. Some European countries are reluctant to act this way, and denials are flying all the time. This comes at a sensitive time, towards the vote on Thursday in the German parliament regarding the approval of the previous powers agreed for the EFSF, those agreed in the July 21 summit.
- Greek default being planned?: The other subject coming out of these meetings is that Greece will be held on a lifeline for 6 weeks, and will default at the beginning of November. The time will be used for preparations in other countries and within banks.
- 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.
- European rate cut: Trichet will step down at the beginning of November. His last move will probably be a rate cut. Some are expecting a big cut of 0.50%, but this is currently rejected. The talk about the ECB’s move also rocks the euro, more than a week before this decision.