By Fast Brokers – The EUR/USD has successfully surpassed the psychological 1.40 level and our previous 3rd tier downtrend line on substantial volume. Therefore, the currency pair may have what it takes to buck the near-term downtrend. The EUR/USD is strengthened despite disappointing PMI data from the EU yesterday. The GBP/USD is also climbing while the USD/JPY declines towards our 1st tier uptrend line. Hence, it appears the EUR/USD is benefitting from an exodus from the Dollar as the FOMC monetary policy decision approaches. Most analysts predict the Fed will signal little change in its monetary policy since inflation doesn’t appear to be an immediate concern. However, investors believe the inability of the Fed to tighten its monetary policy due to the fragile state of the U.S. economy may harm the U.S. economy in the future. Furthermore, the longer such a massive amount of liquidity remains in the marketplace, the longer the Dollar will suffer. The Dollar is depreciating across the board due to this premise, and the EUR/USD is tagging along for the ride.
Despite the broad weakness of the Dollar, the EUR/USD isn’t benefitting as much as it could due to the recent disappointing economic data. In addition to yesterday’s subpar PMI data, the EU reported a higher current account deficit than analysts expected. The current account data confirms that demand for EU exports is not recovering as quickly as analysts had hoped, creating a drag on manufacturing and production. By running a higher current account deficit, the EU is flooding the marketplace with more Euros, placing the currency in a comparatively weak position. Regardless, the EUR/USD is making encouraging progress to the upside from a technical standpoint. If the currency pair can climb above our new 3rd tier downtrend line on sizeable volume, we may be comfortable with reinitiating our positive outlook trend-wise. After all, the EUR/USD’s medium-term uptrend has been intact the entire time, the currency pair may just not make as large of a retracement as we anticipated. However, we remain in a cautious stance, and we will have to wait and see how the Dollar reacts to today’s important economic data from the U.S. combined with the Fed’s policy decision.
Present Price: 1.4084
Resistances: 1.4112, 1.4147, 1.4186, 1.4225, 1.4229
Supports: 1.4052, 1.4028, 1.3978, 1.3947, 1.3894
Psychological: 1.40, 1.45
Market Commentary provided by Fast Brokers.
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