EUR/USD Dec. 15 – Good News But No Recovery

Euro dollar is stabilizing around 1.30, yet again licking the wounds after a fall. The Swiss authorities didn’t chose to weaken the franc against the euro, and this weighed on the single currency. On the other hand, better than expected PMIs and a very successful bond auction in Spain helped the pair stabilize. This is a very busy day. Will it end with a French downgrade? 

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

EUR/USD Technicals

• Asian session: Quiet session after the loss of 1.30. A rise above this level was seen in the European session, but was short lived.
• Current range:  1.2945 to 1.30

• Further levels in both directions: Below  1.2945, 1.2920, 1.2873 , 1.2720 and 1.2580.
• Above:    1.30, 1.3060, 1.3145, 1.3212, 1.3280, 1.3380, 1.3420, 1.3480 and 1.3550.
• 1.2945 is the trough reached after 1.30 was lost, but the really important support is the YTD low of 1.2873.
• 1.3145 remains critical resistance now, if 1.30 is reconquered.

Euro/Dollar under 1.30- click on the graph to enlarge.

EUR/USD Fundamentals

• 8:00 French Flash Services PMI. Exp. 49.1. Actual 50.2 – in growth zone.
• 8:00 French Flash Manufacturing PMI. Exp. 47.1. Actual 48.7 points.
• 8:30 Swiss rate decision. No lift of the 1.20 floor under EUR/CHF, which crashes. EUR/USD also suffers.
• 8:30 German Flash Services PMI. Exp. 50.1 points. Actual 52.7. Very good.
• 8:30 German Flash Manufacturing PMI. Exp. 47.6. Actual 48.1 points.
• 9:00 Euro-zone Flash Services PMI. Exp. 47.1. Actual 48.3 points.
• 9:00 Euro-zone Flash Manufacturing PMI. Exp. 46.1 points. Actual 46.9. All in all, PMIs were very good.
• 9:00 ECB Bulletin. Nothing new.
• 10:00 Euro-zone CPI. Exp. 3%, actual 3%. Core CPI exp. 1.7%, actual 1.6%.
• 10:10 Spanish bond auction: Spain had great success: It raised more money than expected, at lower yields.
• 11:25 ECB President Mario Draghi about “Last Resort ECB”. Should be interesting, after the disappointment in the press conference.
• 13:30 US Unemployment Claims. Exp. 389K.
• 13:30 US PPI. Exp. +0.3%. Core PPI Exp. +0.2%.
• 13:30 US Current Account. Exp. -108 billion.
• 13:30 US Empire State Manufacturing Index. Exp. 3.1 points.
• 14:00 US TIC Long-Term Purchases. Exp. 53.4 billion.
• 14:15 US Industrial Production. Exp. +0.3%.
• 14:15 US Capacity Utilization Rate. Exp. 77.9%.
• 15:00 US Philly Fed Manufacturing Index. Exp. 5.1 points. See how to trade this event with EUR/USD.

* All times are GMT.

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

EUR/USD Sentiment

• No Swiss sugar rush: The SNB didn’t lift the 1.20 floor under EUR/CHF – not to 1.25 nor 1.30. This sent EUR/CHF crashing, and also weighed on EUR/USD.
• Will S&P downgrade France today?In a move that shocked markets, credit rating agency Standard and Poor’s warned all euro-zone countries, apart from Greece, that their rating is endangered.  France, Italy, Spain and others received a two-notch warning.  The rating agency promised a quick answer and official talk from Paris begins preparing the public for a downgrade, saying “it’s not the end of the world” and similar comments. If France loses the AAA rating, so does the EFSF bailout fund. Moody’s and Fitch also added their warnings.
  
• Italian confidence vote on austerity: The euro-zone’s third largest country will hold a confidence vote on Friday, regarding the new austerity plan. The markets don’t like Italy now, with yields hitting 6.8%. Spain, with Spain had great success,  had two good bond auctions this week, and  Italy had a poor one.
• Bernanke doesn’t change policy: The only change seen in the FOMC Statement was a more optimistic view of the labor market. Other than that, the same policy remains unchanged, low interest rate pledge, Operation Twist, etc. The same dissenter, Evans remained. Though this was widely expected, it sent the dollar higher and EUR/USD to 1.30.
• Commerzbank on the edge: Germany’s second largest bank is in intense talks with the government regarding emergency aid. A fall of this bank could trigger a domino effect via Credit Default Swaps. This is one of the 7 reasons for the recent downfall.
• Draghi drags markets down: In one of the busiest rate decisions seen for quite some time, the ECB lowered the interest rate to 1% as expected, eased collateral rules for banks and offered 3 years loans. But on the other hand, ECB president made it clear that the ECB would not scale up its bond buying. So, Italy and Spain continue struggling and the euro falls. One ECB member said the central bank could scale up bond buying, but reality remains different: the ECB scaled down bond buying to less than one billion euros last week. Looks like a lose-lose situation for the euro.
• Greek unemployment on the rise: Greece’s unemployment rate rose to 17.7% in Q3, much higher than 16.3% in Q2. And yet again, the deficit figures for 2011 were revised for the worse. In addition, the pace of withdrawals from Greek banks intensified recently, as the chances of leaving the euro-zone rose. This Greek bank run could bring down the system.
• US labor market tested again: After the unemployment rate fell to 8.6% and last week’s jobless claims dropped to 381K, fresh claims data will be interesting to watch. In addition, note the Philly Fed Index, which is a very early indicator. A surprise there could rock EUR/USD, despite the focus on Europe these day. See how to trade this event with EUR/USD.

Get the 5 most predictable currency pairs