EUR/USD continues looking for a direction as we approach the end of the week. Fears of the collapse of the Italian government haven’t moved the pair too much, nor have dovish Fed comments. The jury seems to be out in the “ugly contest”. FOMC members dominate the scene and overshadow the second tier figures towards the close of the week. Will the pair pick a direction in the last minute?
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- In the Asian session, EUR/USD remained under 1.35 most of theme, and climbed above the line afterwards. Moves are limited.
Current range: 1.35 to 1.3570.
Further levels in both directions: 
- Below: 1.3450, 1.3415, 1.3325, 1.3240, 1.3175, 1.3050 and 1.3000.
- Above: 1.3500, 1.3570, 1.3650, 1.3710, 1.3800, 1.3870 and 1.3940.
- The round number of 1.35 works as support, but it isn’t strong.
- The September peak of 1.3570 is getting stronger as resistance.
EUR/USD Fundamentals
- 1:15 FOMC member Esther George talked. She was hawkish, as expected.
- 6:45 French Consumer Spending for two months: July, exp. +0.3%, actual +0.4%. August exp. +0.1%, actual -0.4%.
- 9:00 ECB president Mario Draghi talked. This was not a monetary policy related speech.
- 9:15 Italian 10 year bond auction: yields stood on 4.5%.
- 9:45 FOMC member Charles Evans talked. He said that QE3 could reach twice the size of QE2.
- 12:00 German preliminary CPI. Exp. 0%.
- 12:30 US FOMC member Eric Rosengren talks. He is a dove.
- 12:30 US Personal spending. Exp. +0.3%.
- 12:30 US Personal income. Exp. +0.5%.
- 12:30 US Core PCE Price Index. Exp. +0.1%.
- 13:55 US revised consumer sentiment. Exp. 78.2 points.
- 14:45 FOMC member Charles Evans speaks again. More dovish talk expected.
- 18:00 FOMC member William Dudley talks. He is influential.
* All times are GMT.
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Octaper seems less likely: Apart from the NFP, the market prices the chances of a reduction in bond buys in October according to the Fed’s sentiment. FOMC member James Bullard told us that the decision not to taper QE in September was a close call, and that tapering in October is certainly possible. However, consequent FOMC speakers poured some cold water over this option. It’s important to follow Rosengren and especially Dudley.
- Jobless claims against all the rest: Most recent US figures have been quite mediocre, but jobless claims continued falling, showing hope for the job market. However, jobless claims continue falling. Even if the data skews have already been fixed, the pre-crisis numbers are finding many skeptics.
- Italian government in danger: The never-ending Berlusconi saga is flaming up again with a fresh threat to bring down the government. Rating agencies are threatening to downgrade the already low credit rating. Will Italian bonds be classified as “junk”?
- Another LTRO?: ECB president Mario Draghi opened the door to another lending program to banks – seen as indirect QE by some. The two LTRO programs introduced nearly two years ago are being gradually repaid, and this reduces the excess liquidity in the system. More loans to banks mean more euros in the markets – a euro negative. However, this type of QE does not necessarily have a negative impact on the euro, as we’ve seen in the past.
- German coalition negotiations could last for a long time:: As widely expected, Chancellor Angela Merkel was re-elected to a third straight term in convincing style. Merkel’s conservative bloc steamrolled to victory but failed to win an absolute majority, so she is now negotiating a coalition with either the big opposition SPD party or the smaller Greens. Given the past, this will take time. The outcome is likely to be a more pro-European government.
A recent technical analysis: EURUSD Could Move Above 1.3600 – Elliott Wave Forecast
Share
