By Fast Brokers – The EUR/USD is screaming higher and we are witnessing the return to volatility forewarned by the multiple inflection points of our trend lines on both the EUR/USD and GBP/USD. Investors started the fall with the bang and we may finally be The Dollar is depreciating swiftly across the board as investors react to the surge in gold and a wave of statements predicting a large, medium-term flight from the Dollar due to the massive liquidity injected into the system to abate the credit crunch. The recent gold rush has proven to be a signal that investors are eager to divest from the Dollar in fear that hyper inflation may be around the bend. While we were speculating China might bring the topic of a new monetary standard to the forefront at the G20 meeting, it seems the global economy as a whole is beginning to step in unison regarding this very sensitive issue. Today’s reaction in the FX markets is a fundamental shift because investors are beginning to trade on the psychology of a resoundingly weaker Dollar instead of focusing on economic data. These two developments are energizing the bulls and giving them ammunition to finally select a new direction. Today’s movements are a resounding technical message with the EUR/USD and GBP/USD rising in unison as the USD/JPY retests previous September lows.
The EUR/USD has broken through our important 3rd tier downtrend line and is presently testing the psychological 1.45 level. The currency pair is setting fresh 2009 highs and appears to be leaving the August trading range behind. While the EUR/USD could experience a little hesitation at 1.45 in light of the extent of today’s upward movement, it seems the currency pair is headed for a new leg higher. We left our trend lines as is on our chart for today so you can view the currency pair’s reaction to the inflection points. All we need is a confirmation in heightened buy-side volume to solidify a new near-term uptrend. The next technical resistances to the topside are the EUR/USD’s psychological 1.45 level and December 2008 highs. As for the downside, August highs should serve as a support should they be tested.
Germany released disappointing Industrial Production number today and is taking a bite out of the Euro’s relative strength considering Britain’s Manufacturing Production data eclipsed analyst expectations. Volatility should only heat up as the week progresses considering tomorrow’s release of the Beige Book and the wealth of U.S., Chinese, and British economic news on Thursday. China’s Industrial Production number will be in focus since the recovery’s attention has been pinpointed on the resilience of China’s economy during the downturn. Any further cooling in China’s economic growth could take some wind out of the EUR/USD’s sails. On the other hand, a continual rise in China’s Industrial Production would only lead investors further away from the Dollar. Regardless, the EUR/USD’s movement today is a strong technical indicator in favor of the uptrend and we could see gains accelerate over the near to medium-term.
Present Price: 1.4479
Resistances: 1.4480, 1.4506, 1.4525, 1.4546, 1.4582
Supports: 1.4454, 1.4430, 1.4408, 1.4388, 1.4363
Psychological: 1.45
Market Commentary provided by Fast Brokers.
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