By FX Empire.com
The EUR/USD fluctuated heavily on Tuesday with all the eyes still focused on the upcoming summit on Wednesday, where an unexpected cancelation for the EU finance ministers meeting fueled further pessimism that nations failed to bridge their differences.
All eyes are still on the comprehensive plan to be presented on Wednesday and the decision to cancel the finance ministers meeting gave a negative vibe to markets that the leaders might not announce the measures, even as their summit is still scheduled in Brussels.
We can see the tension rising and the jitters extending, where the German parliament is also expected to vote on the new plan for expanding the EFSF, and since Merkel voiced rejection already to a clause that echoes EU calls on the ECB to continue bond purchases, where Germany sees that as a move undermining the independence of the bank.
Investors remain fearful, between hope and doubt over what Europe will present to expand the firepower of the EFSF, help Greece, capitalize banks, and also halt the contagion risk.
We still see the volatility extending on Wednesday and the final call will be the plan to be presented. Investors expect to see strong measures and if that was not seen and if Europe delays the plan again we can see the EUR/USD pullback south strongly. On the other hand a comprehensive plan with clear support for banks and Greece will help sustain the gains and strong measures might trigger a strong upside rally, which so far investors are skeptic about.
The United States will release the Durable Goods Orders for September at 12:30 GMT where they are expected to drop 0.7% after 0.1% drop and excluding transportation to rise 0.5% from 0.1% drop.
New Home Sales Index for September is due at 14:00 GMT and expected with 1.7% rise to 300 thousand from 295 thousand.
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