EUR/USD Dec. 17 Eurogroup releases bailout funds to Greece

Market sentiment is brighter as we begin the new trading week. The euro is coming off an impressive rally, with the continental currency hitting three-month highs against the US dollar, as it jumped over two cents against the greenback. Will the upward trend continue? There was tangible progress on the thorny debt crisis, with two important developments out of Brussels late last week. First, the Eurogroup agreed to release the second installment of bailout funds to Greece.

Under the terms of the agreement, the EFSF (European Financial Stability Facility), will release a total amount of EUR 49.1 billion, which will be paid out in several parts. Greece is slated to receive EUR 34.3 billion in the next few days, and the remaining funds by March 2013. Second, the Eurogroup signed a framework 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 and minimize the impact of future banking crises in the zone. Under the agreement, struggling banks would be able to receive emergency funds directly from the ESM (European Stability Mechanism), and would not have to request aid through their national governments. If all goes smoothly, the ECB will begin its new role as a “super bank commissioner” by January 2014.

There have also been discussions of widening the ECB's supervisory powers to cover EU banks which are not located in the Euro-zone. Back in the US, the dollar was broadly lower following the Federal Reserve's announcement that it would implement another round of quantitative easing (QE4), and purchase an additional 45 billion dollars per month in Treasury holdings in order to boost the US economy. There are only a few economic releases on Monday. Italian Trading Balance hit a four-month high, as it posted a surplus for the second consecutive month. Euro-zone Trade Balance disappointed, as it fell well below the estimate.

EUR/USD for Monday, Dec 17, 2012

EUR/USD Dec 17 at 10:30 GMT
1.3169 H: 1.3149 L: 1.3144

S3 S2 S1 R1 R2 R3
1.3030 1.3080 1.3135 1.32 1.3235 1.3280

EUR/USD Technical
EUR/USD was quiet in the Asian session, with the pair consolidating around 1.3160. The range trading has continued in the European session. The current range is quite narrow, with 1.3130 providing support, and 1.3170 the next line on the upside.
• Current range: 1.3135 to 1.32
Further levels in both directions:
• Below: 1.3135, 1.3080, 1.3030, 1.2960, 1.2880, 1.28, 1.2750, 1.2690, 1.2624, 1.2590, 1.25, 1.2440, 1.2390 and 1.2250.
• Above: 1.32, 1.3235, 1.3280, 1.3385, 1.3485 and 1.3575.

OANDA's Open Position Ratios
The euro enjoyed a strong rally against the dollar last week, but trader bias remains firmly tilted in favor of short positions. The euro could cough up some of these gains and consolidate closer to the 1.31 line, but there is a significant long position sentiment, which should not be ignored.

The euro is looking good following a nice rally last week. EUR/USD is quiet in Monday trading, and with only a few economic releases scheduled, we could see the pair continue to trade in a narrow range.

EUR/USD Fundamentals
• 9:00 Italian Trade Balance. Estimate +0.25B. Actual +2.45B.
• 10:00 Euro-zone Trade Balance. Estimate +10.8B. Actual +7.9B.
• 13:30 US Empire State Manufacturing Index. Estimate -0.7 points.
• 14:00 US TIC Long-term Purchases. Estimate 24.3B.
• 14:30 ECB President Mario Draghi addresses the Committee on Economic and Monetary Affairs in Brussels.
• 16:00 US FOMC Member Jeremy Stein Speaks.
• 18:00 US FOMC Member Jeffrey Lacker Speaks.

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

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