Euro vs Dollar 12 Feb 2010

Yesterday’s lukewarm communique following the EU summit convened to resolve the Greek fiscal problem was, as my mother is wont to say, say “tutto fume ma nient’arrosto” ie all smoke and no roast!  It simply confirmed to the markets that nobody at present has a clear plan, or intends to take action until forced to do so.  Yesterday’s candle on the daily euro vs dollar chart reinforced this view with the high of the day meeting resistance from the 9 day moving average once again and closing the day with a relatively narrow spread down bar with a wick to the lower body.  The downwards momentum has continued unabated in this morning’s London session with the euro breaking below the psychological USD1.36 level and at writing is trading at USD1.3562.  At this level it is now running into potential minor support established back in 2005, and should this fail to hold then the next serious level of support is in the USD1.2950 region.  If the EU fail to communicate a concrete plan to the markets then the euro will continue to be punished and longer term could even re-test as low as USD1.20, last seen in mid 2005.  Whilst it is relatively easy to join the ever growing throng of euro bears be warned that any positive statement of support for Greece, with a plan, will reverse the trend in the blink of an eye, with many traders caught on the wrong side of the market.   This could happen at any time, even over a weekend so ensure that any open positions are well protected with trailing stop losses to lock in profits as the pair continue to move south.

The most significant item of fundamental news on the economic calendar this morning has been German Preliminary which came in flat at 0% against a forecast of 0.2% which simply yet more bearish pressure to the beleaguered euro.  In addition the Italian GDP figures were also bad and the only country to post a positive set of numbers was France.  To add further to the bad news in Europe this morning, Industrial production fell far short of expectation with a negative number of -1.7% against a forecast of 0.3%, so hardly a stellar performance in Europe.  This afternoon in the US we have core retail sales and retail sales which are both forecast at 0.4%, moving into positive territory from last time.  Should the numbers come in better than expected that this may increase further downwards pressure on the euro.  Finally this afternoon we have the UoM consumer sentiment data which is expected to show an improving picture once again, up 0.4 from last month’s 74.4.  The week rounds off with the delayed crude oil inventories.

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Eurodollar News :

Vague Support for Greece Punishes the Euro

Is the Euro the pinata of the currency markets?

Eurozone economy falters

Market & EU standoff – Ambrose explains