By Fast Brokers – The EUR/USD is backing away from our 2nd tier downtrend line and the psychological 1.40 mark as volume to the upside has been insufficient thus far in prompting meaningful gains technically. Even if an immediate-term rally is to ensue in the EUR/USD with the currency pair climbing past the psychological 1.40 level and July 7th highs, it still has to confront our 3rd tier downtrend line hanging in the distance. Therefore, the currency pair is a far cry from reinitiating its medium-term uptrend. Investors should keep in mind that volume on the sell-side has been larger than the buy-side, reflecting the negative attitude out there. Regardless, the present hop out of our 2nd tier downtrend line is encouraging, indicating the bulls are aiming to achieve further stabilization in the currency pair.
The EUR/USD made a noteworthy bounce from our important 2nd tier uptrend line after German Industrial Production came in much higher than expected, countering June’s setback to the downside. In fact, yesterday’s release is the highest reading in years, and should help ease investor uncertainty for the time being. In addition to yesterday’s positive Industrial Production number, Germany reported a large, unexpected increase in Factory Orders on Monday. The recent optimistic signs from the Germany economy are helping stabilize the Euro despite growing pessimism in global markets. Today’s positive performance in the EUR/USD comes from a better than expected earnings report from Alcoa. Cost-cutting measures were able to counter Alcoa’s decline in revenue more effectively than anticipated, giving investors hope that the 2nd quarter earnings season may not be so bad after all. However, Alcoa’s earnings are strongly correlated to the cost of aluminum, so it’s unwise to make an assumption about the 2nd quarter earnings season based off of the report of one commodity price-reliant company.
Since news will be relatively quiet on the EU front this week, we expect the EUR/USD to take its cue from U.S. equities and crude futures. The S&P futures are trading near critical supports, and any protracted downward movement in the S&P should be accompanied by a broad-based appreciation of the Dollar. We don’t expect the positive correlation between the EUR/USD and equities to change any time soon, so U.S. corporate earnings should play a big role in the currency pair’s immediate-term movements. Since the S&P futures are trading around important supports, we believe the multiple inflection points in the EUR/USD may signify an approaching trend-making move. However, the 2nd quarter earnings season doesn’t really start cooking until next week, so the EUR/USD may choose to stay range-bound for the remainder of the week…Stay tuned.
Present Price: 1.3991
Resistances: 1.3991, 1.4020, 1.4050, 1.4065, 1.4091
Supports: 1.3970, 1.3944, 1.3915, 1.3889, 1.3865
Psychological: 1.40
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.
