By Fast Brokers – The EUR/USD is tumbling lower and it seems May lows are about to give way. European equity markets are deep in the red as negative news from China delivers a blow to the risk trade. China’s manufacturing PMI figure came in below analyst expectations, fueling fears of a slowdown in the orient as the government tries to deflate its real estate bubble. Li Daokui, a member of China’s central bank policy committee, suggested that China’s property bubble could be worse than America’s due to the possibility of social unrest. For further analysis on this topic, you can read my blog post last week ‘Year of the Tiger’ at www.blogs.fastbrokers.com/matthew. Meanwhile, the ECB announced that it expects there to be approximately $240 billion in writedowns at European banks. The ECB was also cautious in its statement, pointing out that fiscal problems and austerity measures could damage banks more than expected. The combination of negative news and data from China and the EU seems to be sending the EUR/USD towards a new leg down and possible test of its highly psychological 1.20 level over the near-term. The Although the EU has its unemployment rate number on the way, more emphasis will likely be places on America’s manufacturing PMI release.
Technically speaking, the EUR/USD is now testing the patience of May lows and could send head towards the depths of April 2006 lows. Meanwhile, the EUR/USD does have the highly psychological 1.20 level in play should the pullback accelerate. As for the topside, the EUR/USD faces multiple downtrend lines along with 5/31 and 5/28 highs.
Present Price: 1.2155
Resistances: 1.2170, 1.2196, 1.2234, 1.2251, 1.2268, 1.2280
Supports: 1.2146, 1.2120, 1.2098, 1.2080, 1.2064, 1.2050, 1.2035
Psychological: May 2010 highs and lows, March 2006 lows, 1.22, 1.20
(click chart to enlarge)
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