By Fast Brokers – The EUR/USD is continuing its pullback as anticipated, stumbling towards our 3rd tier uptrend line as it appears the bulls have exhausted themselves. The ECB kept its monetary policy unchanged, also as anticipated. However, the BOE increased its QE package by $84 billion in order to try and counter deflationary forces. The BOE’s move is spooking FX markets a bit, appreciating the Greenback across the board. Furthermore, gold is consolidating while the S&P hovers around 1000 despite lower than expected weekly unemployment claims. The S&P’s lack of reaction to the Unemployment Claims number shows the present run is just about out of gas. Therefore, continued consolidation with a downward sloping pattern is likely as investors take a deep breath and recoup. However, the break may not last so long since both Britain and the U.S. will release more important economic data tomorrow along with Germany’s m/m Industrial Production number.
Speaking of data, a much better than expected Factory Orders number from Germany flew under the radar with the central banks grabbing the spotlight. The return to growth in German Factory Orders is holding steady, an encouraging sign for the EU economy as a whole. The EU is getting a positive piece of data at just the right time considering the underperformance of EU economic Data as of late. A positive German Industrial Production number tomorrow could help the EUR/USD build some relative strength. After all, the ECB is the central bank sticking to its guns while Britain digs deeper into its pockets to increase liquidity. However, the Euro’s comparative strength may not last long since the BOE’s injection should wear off rather quickly. Furthermore, regardless of any pullbacks, the momentum is still in favor of the uptrend since news and data out of the U.S. and Britain has been resoundingly positive over the past month.
As for the immediate-term, the EUR/USD may experience a little more selling pressure with investors cashing in on mixed global data. Therefore, we wouldn’t be surprised to see the currency pair duck down towards our 3rd tier uptrend line. Speaking of which, the EUR/USD is trading above all three of our uptrend lines with only a makeshift 3rd tier downtrend line clamping down the currency pair. The EUR/USD remains comfortably above June 3rd and July 28th highs. Hence, the uptrend is clearly in control in the moment, and it would take a large technical downward movement to dislodge the EUR/USD’s upward momentum.
Our 3rd tier downtrend line and the psychological 1.45 level appear to be the only near-term barriers separating the EUR/USD from a retest of December 18th highs. The other factor capping the EUR/USD’s upward mobility is the S&P’s interaction with 1000. The 1000 area should prove to be a challenging obstacle. The S&P’s ability to leapfrog 1000 should play an important role in the EUR/USD’s ability to overcome its own barriers to the topside. Therefore, investors should keep a close eye on U.S. equities and Friday’s key employment data. If either the U.S. Unemployment Rate or Non-Farm Employment Change are higher than anticipated the EUR/USD may experience heightened volatility to the downside. On the other hand, positive employment data would likely provide a strong counterbalancing force.
Present Price: 1.4363
Resistances: 1.4391, 1.4441, 1.4476, 1.4506, 1.4546
Supports: 1.4348, 1.4305, 1.4266, 1.4242, 1.4225
Psychological: 1.45
Market Commentary provided by Fast Brokers.
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