EUR/USD Eurogroup releases bailout funds to Greece

EUR/USD is showing some volatility in Friday’s European session, and has fallen below the 1.31 level. The euro has still posted an impressive rally this week, having gained close to two cents against the US dollar. After months of uncertainty, the ongoing Greek debt saga appears to be moving in the right direction. Eurozone finance ministers finally agreed to release the second installment of bailout funds to Greece. At a meeting in Brussels on Thursday, the Eurogroup approved the release of the second installment of the Greek bailout, following the successful completion of the Greek government’s debt buyback scheme.

The EFSF will release a total amount of EUR 49.1 billion, which will be paid out in several installments. Greece is scheduled to receive EUR 34.3 billion in the next few days, with the remaining funds to be delivered by March 2013.

The buyback program and bailout package are critical milestones in getting the struggling country back on its financial feet. If all goes well, Greece’s debt to GDP ratio is expected to drop to 124 per cent by 2020. There was more news out of Brussels, as the Eurogroup approved an agreement whereby the ECB will become the single supervisor for the 200 largest banks in the Eurozone. The move aims to achieve closer financial integration in the Eurozone and provide protection for the euro from future financial crises. Under the agreement, financial institutions finding themselves in trouble would be able to directly approach the ESM for funds, rather than go through their national governments. If all goes smoothly, the ECB should begin its role as “super bank commissioner” no later than January 2014.

Across the ocean, the markets continue to absorb the news of further monetary easing by the Federal Reserve, in the form of QE4. Under this program, the Fed will purchase an additional $45 billion per month in Treasury holdings in order to boost the US economy.

The markets will be busy on Friday, with lots of economic releases from both Europe and the US. European PMI data was mostly within expectations, but German Flash Manufacturing PMI disappointed, as it failed to meet the estimate. In the US, today’s key release is US Core CPI.

EUR/USD for Friday, Dec 14, 2012

EUR/USD Dec 14 at 10:00 GMT
1.3083 H: 1.3083 L: 1.3067

S3 S2 S1 R1 R2 R3
1.2880 1.2960 1.3030 1.3080 1.3030 1.3170

EUR/USD Technical
EUR/USD showed some strength earlier on Friday, as the pair crossed above the 1.31 line. The pair has since retracted, and is testing the support level of 1.3080. If this line falls, there is room for the pair to continue lower towards the next support line at 1.3030. On the upside, 1.3130 has strengthened in a resistance role.
• Current range: 1.3080 to 1.3130
Further levels in both directions:
• Below: 1.2960, 1.2880, 1.28, 1.2750, 1.2690, 1.2624, 1.2590, 1.25, 1.2440,
• 1.2390 and 1.2250.
• Above: 1.3030, 1.3080, 1.3130, 1.3170, 1.3290 and 1.34.

OANDA’s Open Position Ratios
Trader bias is firmly tilted in favor of short positions. The euro has enjoyed a strong week against the greenback, but today’s volatility could result in the pair giving up some of those gains and losing some ground before consolidating.

The euro responded positively to the Fed announcement of further quantitative easing and briefly pushed above the 1.31 line. However, the pair has since retracted as it shows more volatility. We could see further downside movement, resulting in limited losses before the end of the trading week.

EUR/USD Fundamentals
• 8:00 French Flash Manufacturing PMI. Estimate 44.9 points. Actual 44.6 points.
• 8:00 French Flash Services PMI. Estimate 45.8 points. Actual 46.0 points.
• 8:30 German Flash Manufacturing PMI. Estimate 47.1 points. Actual 46.3 points.
• 8:30 German Flash Services PMI. Estimate 50.0 points. Actual 52.1 points.
• 9:00 Eurozone Flash Manufacturing PMI. Estimate 46.6 points. Actual 46.3 points.
• 9:00 Eurozone Flash Services PMI. Estimate 47.0 points. Actual 57.8 points.
• 10:00 Eurozone Employment Change. Estimate 0.0%. Actual -0.2%.
• 10:00 Eurozone CPI. Estimate +2.2%. Actual +2.2%.
• 10:00 Eurozone Core CPI. Estimate +1.5%. Actual +1.4%.
• All Day: EU Economic Summit (Day 2).
• 13:30 US Core CPI. Estimate +0.2%.
• 13:30 US CPI. Estimate -0.2%.
• 14:00 US Flash Manufacturing PMI. Estimate 52.6 points.
• 14:15 US Capacity Utilization Rate. Estimate 77.9%.
• 14:15 US Industrial Production. Estimate +0.3%.

*Key releases are highlighted in bold
*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.