By Fast Brokers – The EUR/USD is declining as investors exit the risk trade in reaction to Bernanke’s cautious comments yesterday in conjunction with Moody’s warning that the U.S. and UK are testing the patience of their Aaa Ratings. Bernanke attempted to soothe investor excitement stemming from Friday’s much better than expected U.S. employment data, resulting in a sizable Dollar appreciation. Bernanke managed to devalue the Dollar a bit and stabilize equity markets after he stated that the U.S. economy still faces considerable headwinds. That being said, Bernanke is attempting to clarify that the Fed is planning on maintaining its loose monetary policy for the foreseeable future. Hence, the central bank will need further confirmation from economic data before considering shortening its policy timeframe. Meanwhile, Moody’s stated that the UK and U.S. may ‘test the boundaries’ of their Aaa ratings if they don’t get a handle on their respective budget deficits. The news from Moody’s, in addition to new uncertainty surrounding Dubai’s debt, has managed to trigger a risk-aversion session. As a result, the EUR/USD, GBP/USD, USD/JPY, and gold are all trading in the red.
The EU releaesd a couple disappointing data points which aren’t helping out the EUR/USD’s cause. Yesterday German Factory Orders printed -2.7% below analyst expectations (0.6%). The decline in factory orders is likely a symptom of the EUR/USD’s solid run last month. Furthemore, Germany printed an Industrial Production figure today which was also well beneath analyst expectations (-1.8% vs 1.1% exepcted). Therefore, it seems Germany’s economic productivity is cooling off a bit. The disappointing data points are likely adding to the downward pressure on the EUR/USD already being inflicted by the aforementioned psychological developments. The EU will be relative quiet on the data wire over the next couple sessions, leaving its movements in the hands of Thursday’s BoE meeting followed be the release of China’s Industrial Production number in the PM EST.
Technically speaking, the EUR/USD is currently testing the strength of our 1st tier uptrend line, which could carry some weight since it runs through September lows. However, the currency pair does have some technical cushions resting nearby in the forms of 10/30 and 11/03 lows. Furthrmore, the psychological 1.45 level could work in the EUR/USD’s favor should conditions deteriorate. As for the topside, the EUR/USD now faces multiple downtrend lines along with 12/08 and 12/07 highs. Additionally, the highly psychological 1.50 area should serve as a tough psychological barrier again should it be tested.
Present Price: 1.4756
Resistances: 1.4778, 1.4795, 1.4812, 1.4841, 1.4859, 1.4875
Supports: 1.4754, 1.4738, 1.4715, 1.4682, 1.4672, 1.4650, 1.4631
Psychological: 1.45, 1.50, November Lows
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.
