By Fast Brokers
The EUR/USD’s rally topped out at our 1.3389 resistance yesterday, or April 13 highs. The hesitation comes as the S&P futures approach their critical 900 level. Therefore, we view today’s decline as healthy hesitation. The EUR/USD should find near-term safety in our 1.3208 support and 3rd tier downtrend line. However, if these fundamentals don’t hold, we could see a retracement towards our 1.3089 support, or 4/10 lows.
Weakness in the Euro comes despite a better than expected German Unemployment Change Number. Although the reading is high historically speaking, at least the release shows a topping out. Analysts were looking for a one basis point improvement in the EU’s CPI Flash, but they didn’t get it. The consumer price data remained at a very depreciated level, echoing the message sent on Tuesday by the German Prelim CPI number. Therefore, the message Europe’s data is sending thus far this week is an improvement in unemployment and consumer sentiment combined with slight deflation. Meanwhile, the CAC40 and DAX are rallying like mad, following in the footsteps of U.S. equities. Hence, the CPI data may be lagging behind relative consumer and corporate optimism, meaning prices could begin to rebound a little over the next month.
All of these developments are good news for the EUR/USD, since a recovery in equities means the EUR/USD will tag along for the ride due to their positive correlation. Additionally, if an economic recovery is truly taking place, the EU sits in an advantageous position since the ECB kept their benchmark rate at a respectable level while fighting off the temptation to use quantitative easing like the BOE, BOJ, and Fed. However, the ECB is still sending a mixed message and we will have to see how events unwind as their next monetary policy meeting approaches.
While the EUR/USD could continue to experience some weakness as the S&P struggles with 900, we believe a new bullish trend could be in place. Ultimately the currency pair will next to put 4/13 highs behind it for a shot at the psychological 1.35 mark. On the other hand, if the EUR/USD falls apart and 4/10 lows don’t hold, we could see a real reversal into the currency pair’s debilitating downtrend.
Fundamentally, we find resistances of 1.3236, 1.3295, 1.3329, 1.3389, and 1.3420. To the downside, we see supports of 1.3208, 1.3170, 1.3127, 1.3089, and 1.3039. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3218.
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
