By Fast Brokers
Volume topped out yesterday as anticipated and the EUR/USD slipped down towards our 1.4117 support. The currency pair is bouncing back on Wednesday despite the EU unemployment rate coming in one basis point higher than expected at 9.2%. Our trend lines are reaching their inflection point right now, indicated we could see a bullish breakout today into the 1.43-1.44 range. The present relative strength of the Euro is supported by a rising EUR/GBP. However, yesterday the EUR/GBP registered significant losses from a technical standpoint. The EUR/GBP sank beneath December 2008 lows, a very bearish move. Therefore, even though we’re witnessing an intraday recovery in the currency pair, it appears the EUR/GBP’s downtrend has more room to go. Hence, even though we maintain our bullish outlook on the EUR/USD trend wise, it seems the currency pair may continue to post a relatively weak performance as compared to the GBP/USD should the Dollar depreciate further.
Regardless of the near-term peak, the EUR/USD remains in great shape. The currency pair continues its bull run with all foreseeable medium-term downtrend line pressures fading into the distance. Even though the EUR/USD’s uptrend has played out beautifully, the currency pair is approaching some near-term obstacles which could result in some consolidation. These obstacles include 12/29 and 12/18 highs. Therefore, the 1.43-1.47 area could prove to be a bit challenging in the near-term. While a wide 3% range, 1.43-1.47 gives you an idea of where the EUR/USD might bounce around. 1.43-1.44 could naturally serve as the 1st consolidation point with investors awaiting the results of the ECB meeting on Thursday. We won’t see too much data from the EU until then, giving all the more reason to anticipate an incoming period of consolidation. However, if the EUR/USD can manage to pop above 1.4432 then the currency pair may ignore 1.43 consolidation and accelerate near-term gains.
Meanwhile, economic data around the globe continues to improve. Investors are shrugging off the GM bankruptcy in what appears to be a buy on the news. While investors are anticipating the ECB to keep its benchmark rate at 1%, the central bank pulled a trick card last meeting by announcing the purchase of covered bonds. As a result, investors will be paying more attention to the ECB’s action and if inaction language concerning their alternative monetary policy actions. The EUR/USD should continue to benefit as long as the global economy recovers and investors exit the dollar from fear of inflation in the U.S. Therefore, it appears we are returning to pre-crisis norms of a weak dollar and pricey oil.
Fundamentally, we maintain our resistances of 1.4222, 1.4290, 1.4325, 1.4374, and 1.4432. To the downside, we hold our supports of 1.4187, 1.4117, 1.4078, 1.4024, and 1.3987. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4216.
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