By Fast Brokers – The EUR/USD has stabilized a bit and popped back to its psychological 1.32 level after yesterday’s large selloff resulting from and S&P downgrade of Greek and Portugal debt. As everybody knows by now, Greece’s debt was cut to junk and Portugal’s was downgraded two notches. The debt yields of all PIIGS nations rose yesterday as the fear of contagion elevated to a new level. The risk aversion was uniform across the board with sovereign debt problems encouraging investors to head towards the exit. The EUR/USD is now approaching its key 1.30 level and May 2009 lows, signifying the EU is tipping into a crisis. It will be interesting to see if the EU and IMF step in soon or allow uncertainty to build further. If these bodies don’t act soon it is possible that the fear of contagion could become a reality. On a positive note, GfK consumer confidence came in stronger than expected today, extending the recent outperformance of EU fundamental data. In fact, it is likely this positive swing in fundamentals that is keeping the EUR/USD afloat. Meanwhile, all heads turn to the Fed to see how the central bank reacts to impressive U.S. fundamentals. Although the EU will release Germany Unemployment Change and M3 money supply data tomorrow, the next 24-48 hours will likely be all about the dollar’s reaction to the Fed’s decision and resulting monetary language.
Technically speaking, the EUR/USD faces mounting downtrend lines along with intraday and 4/27 highs. Additionally, the psychological 1.33 area could serve as a psychological barrier should it be tested. As for the downside, the EUR/USD has May 2009 lows and the psychological 1.31 and 1.30 areas serving as technical cushions.
Present Price: 1.3192
Resistances: 1.3202, 1.3210, 1.3223, 1.3233, 1.3245, 1.3265
Supports: 1.3190, 1.3165, 1.3154, 1.3142, 1.3127, 1.3100
Psychological: April highs and May 2009 lows, 1.33, 1.32, 1.31, 1.30
(click chart to enlarge)
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