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Euro dollar  is moving higher within a higher range. Optimism about a super strong bailout fund continue to boost the single currency, despite all the denials. End month / quarter flows also help the euro and European stocks. Will we see a breakout?

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

EUR/USD Technicals

  • Asian session: This session saw a consolidation of the gains, with the pair relaxing towards 1.3550. The rises resumed in the European session.
  • Current range: 1.3550 to 1.3630.EUR USD Chart September 28 2011
  • Further levels in both directions: Below   1.3550,  1.35, 1.3430,, 1.3385, 1.3322, 1.3250, 1.3180.
  • Above:  1.3630, 1.37, 1.3750 1.3838, 1.3950
  • Note the wide uptrend support that the pair leans on.
  • 1.3630 is still significant resistance on the upside.
  • On the downside, there’s still a long way to go before serious support.

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

EUR/USD Fundamentals

  • German initial CPI. Exp. -0.1%.
  • 6:00  German Import Prices. Exp. -0.3%. Actual -0.7%.
  • 12:30 US  Durable Goods Orders. Exp. -0.2%. Core orders exp. +0.1%.
  • 21:00 US Federal Reserve Chairman Ben Bernanke talks.

* All times are GMT.

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

EUR/USD Sentiment

  • EFSF Votes: The Finnish parliament will vote today on the strengthened EFSF powers agreed on July 21st. The German parliament will vote tomorrow. Both are expected to approve, but nothing is certain. The final stamps can help the euro. A disapproval or a delay will significantly weaken it.
  • Multi-trillion bailout fund?: The hopes of leveraging the bailout fund (EFSF) are gaining traction despite fierce denials, especially from Germany. This way, the fund will be able to safeguard Italy and Spain as well. This talk pushes the euro higher. Some German lawmakers fear that that the “grand plan” which the market thinks is coming will be revealed after the approval.
  • Greek default being planned?: The talks about a default will not die. Also here, denials don’t help. According to reports, 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. These plans may also be awaiting the German parliament’s approval.
  • End of month / quarter flows: Some funds are re balancing their portfolios towards the end of this period, which has been characterized by stock market drops and a stronger dollar. This is one of the reasons for the current rise. Here are more reasons for the euro strength  (and why it’s probably temporary).
  • US weakness: While the focus is naturally on the European debt crisis, also the US economy remains weak. New home sales and consumer confidence confirmed this sluggishness. Durable goods orders will be interesting to watch.
  • 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.