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Euro dollar  enjoyed a nice rise in German industrial production and a relief from Germany’s constitutional court, that didn’t reject bailouts. But these gains are limited as the situation in Greece remains very sensitive, especially as the Finnish threats to bail out of the Greek bailout become more serious.

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

EUR/USD Technicals

  • Asian session: Quiet session saw the pair edging up towards 1.4030. It managed to break higher afterwards but retreat.
  • Current range 1.4030 to 1.41.EUR USD Chart September 7 2011
  • Further levels in both directions: Below  1.4030, 1.3950, 1.3838, 1.3750, 1.36.
  • Above:  1.41, 1.4160, 1.4220, 1.4282, 1.4330, 1.44, 1.4480, 1.4520, 1.4550.
  • 1.4030 is now weaker after being broken. Key support is 1.3950.
  • 1.4160 returns to be strong resistance on the upside.

Euro/Dollar recovery limited support  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 8:00 German court ruling – approves bailouts, but “the decision was tight”. A limited relief rally eventually reversed.
  • 10:00  German Industrial Production. Exp. +0.6%. Actual +4%. Positive for the euro.
  • 15:15 US FOMC member  Charles Evans talks.
  • 18:00 US  Beige Book. Provides some hints towards the FOMC decision.

* All times are GMT.

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

EUR/USD Sentiment

  • Bailouts approved: The Karlsruhe based constitutional court gave the green light to bailouts, but the decision was tight and more parliamentary supervision was advised. In any case, these bailouts are far from doing a perfect job.
  • Swiss sugar rush: The SNB decided to set a floor of 1.20 in EUR/CHF in order to help the economy. The statement was very strong and included a pledge to buy unlimited amounts of foreign currency and “not to tolerate” the strength of the Swiss franc, as long as deflation risks are strong. EUR/CHF shot up by over 1100 pips (from 1.10 to 1.2150) before settling above 1.20. This pushed EUR/USD higher, and still helps the pair. The Swiss move is huge.
  • Will Trichet hint about a rate cut?: Tension is growing towards the ECB decision, one before last for Trichet. After already acknowledging the lower inflation, Trichet is likely to soften his tone. Will he take another big step? See the ECB Preview for details.
  • Greek bailout seriously questioned: The EU / IMF delegation left Greece with anger, hinting that the Greeks should do more to meet their obligations. European leaders are urging the July 21 agreements to be ratified and everybody is warning of dangerous times. German finance minister stated “No money for Greece” if it doesn’t get serious. Political capacity in Athens is limited. An internal committee in Greece stated that Greek debt is “out of control”. It’s the same crisis over and over again. And now Finland threatens to pull out of the bailout.
  • US services sector still growing    After the bitter disappointment from the Non-Farm Payrolls, the ISM Non-Manufacturing PMI came out better than expected and lowered the expectations for QE3.
  • ECB  Sterilizes Bond Buying  :  The  ECB continues keeping yields down. The ECB already spent above 40 billion euros in the current round of buying Italian and Spanish bonds in the past three weeks. It has managed to drain this money from the markets. Sterilized actions are positive for the currency. If this money isn’t drained – it’s QE.
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