EUR/USD Climbs above our 4th Tier Downtrend Line

By Fast Brokers – The EUR/USD has popped above our key 4th tier downtrend line after the combination of better than expected U.S. and British GDP data with an encouraging EU Services Confidence number has motivated bulls to re-enter the risk pool.  The S&P futures are knocking at the door of their previous 2009 highs while the 30 Year T-Bond futures drop like a rock.  To top the cake, gold is registering an explosive move to the topside.  As a result, all of the EUR/USD’s correlations are indicating a bullish movement approaching.  It appears the volatility we were anticipating is finally kicking in.  The EUR/USD’s ascent past our 4th tier downtrend line is a key technical move in our eyes since it runs through August highs.  Hence, the EUR/USD may be headed for a larger leg up with a high probability of retesting these August 5th highs.  We notice volume is picking up on the buy-side, highlighted by the 1-hour chart.

Even though America’s better than expected GDP number passed by without a flinch, Britain’s GDP number is driving home the fact that the global economy is stabilizing.  However, there are a few cautionary notes hiding behind the silver lining.  U.S. Unemployment Claims aren’t dropping as quickly as projected and Japan’s economy is taking a beating.  Furthermore, it remains to see what impact tighter liquidity in China will have on the EU’s manufacturing base.  If China cools down, the EU’s rebound may hit a speed bump since Chinese demand has been fueling the global economic recovery. Regardless, the S&P futures may be the driving force behind the EUR/USD’s next leg up as they distance themselves from 1000 and head to new highs.  Investors aren’t discouraged by the mixed economic data and are buying into the concept of a lasting recovery.  Hence, even though China may tap on the brakes, rising U.S. demand for EU exports could more than compensate from the slowdown in the East.

The EUR/USD’s technical obstacles to the topside will likely be August highs and the meat of the 8/3-8/6 trading range.  Beyond these levels the next level of significance is the currency pair’s psychological 1.45 level.  As for the downside, the EUR/USD has multiple uptrend lines, intraday lows, and our support levels to fall back on.

Present Price: 1.4367

Resistances: 1.4373, 1.4383, 1.4397, 1.4410, 1.4424

Supports: 1.4340, 1.4327, 1.4310, 1.4297, 1.4281

Psychological: 1.40, 1.45

Market Commentary provided by Fast Brokers.

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