By Fast Brokers – Broad-based strength in the Dollar and U.S. equities is dragging and the EUR/USD is consolidating below September highs in reaction. We recognize technically significant pullbacks in crude and the Cable, indicating a more debilitating downturn may be approaching. Meanwhile, the S&P futures are sinking below our 2nd tier uptrend line, and are looking to test our important 1st tier uptrend line. The Euro continues to flex a relative strength despite Germany’s Ifo Business Climate coming in shy of analyst expectations. Today’s business climate release combines with negatively mixed EU PMI data on Wednesday. Additionally, U.S. Existing Home Sales registered a surprising decline this morning. In all, we are witnessing a slowdown in broad economic indicators around the globe. It seems the global economic recovery has hit a speed bump. The retraction is taking a bite out of investor sentiment today. Now the question becomes whether this is a minor speed bump on the path to recovery, or the beginning of a double dip recession as some analysts have been predicting. While we wouldn’t rule out the latter, it is clearly too early to call. We also wouldn’t give up on the EUR/USD’s near-term uptrend since the currency pair has several uptrend lines to fall back on. For the time being, investors should keep an eye on the S&P futures as a true barometer. Any significant technical deterioration in the S&P would likely drag the EUR/USD lower with it. Conversely, resilience of the S&P futures at our 1st tier uptrend line would hold the ship together. Meanwhile, the Euro should continue to exercise its relative strength as long as the Fed stands pat and the BoE exhibits such a potent dovish behavior monetarily. Regardless, investors should certainly monitor the situation closely.
Technically speaking, the EUR/USD has one more tough area of resistance before taking another large leg up. 8/21/08 highs and the 8/12/08-8/13/08 consolidation represent a zone of strong technical resistance, especially since they revolve around the highly psychological 1.50 level. That being said, the EUR/USD may have limited room to the topside for the immediate-term. However, an eclipse of these levels on a boost in volume could ignite another impressive rally in the currency pair. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with weekly lows and the psychological 1.45 level. Therefore, the EUR/USD has several lines of defense to the downside. Though the uptrend is intact, we are initiating a neutral outlook on the EUR/USD as we monitor the behavior of the Dollar and U.S. equities.
Present Price: 1.4719
Resistances: 1.4724, 1.4725, 1.4780, 1.4798, 1.4822, 1.4841
Supports: 1.4703, 1.4678, 1.4656, 1.4634, 1.4611
Psychological: 1.45, 1.50
Market Commentary provided by Fast Brokers.
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