Source: ForexYard
The failure of the EUR/USD to advance above the 1.4900 level is beginning to slow momentum traders and profit taking in the pair has ensued. Versus the pound the euro is higher after weaker than expected UK manufacturing data. The USD/JPY is closing in on the 80 yen price, a level that could bring further intervention from the Japanese Ministry of Finance.
The euro is showing a sign of weakness as the EUR/USD treads water for the 4th day in a row. The pair has failed to move above yesterday’s high of 1.4900 and has encountered a bit of profit taking, trading as low as 1.4754 early in the morning before moving higher to 1.4780. European PPI m/m for March was in line with market expectations for an increase of 0.7%, but the reading is still the fastest increase in the past 2 ½ years. This should continue to pressure the ECB to raise interest rates again, perhaps in June or July. Currently the EUR/USD is caught in a consolidation pattern with support at 1.4750. A breach below this level could trigger stops and further selling to the 1.4650 – 1.4625 support level. The long term target remains at the 2009 high at 1.5140.
Following a disappointing Manufacturing PMI release, the pound tumbled versus both the dollar and the euro. March PMI fell to 54.6 from 57.0 on expectations for no change in the survey. The report’s negative tone was further emphasized with the previous month’s reading adjusted lower to 56.7. The GBP/USD fell to 1.6467 from 1.6616. Traders may look to reenter long on the cable at 1.6430, a support level from late April that coincides with a 38.2% retracement from the April move higher.
After the weak manufacturing number the EUR/GBP surged to a 13-month high at 0.8979, triggering stops above the 0.8940 resistance level. The next resistance on the weekly chart is found at 0.9150 off of the February 2010 high.
The USD/JPY has slipped below the 50% retracement level from the pre-intervention low to the April high, falling to 80.70 on the day from 81.03. The pair continues to inch closer to the 80 yen line in the sand. At this price level the Japanese Ministry of Finance may feel the need to step in and intervene in the forex market to help weaken the yen.
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