By Fast Brokers
The EUR/USD is selling off Monday after the currency pair failed to get follow-through volume to the upside during Friday’s trading session. Hence, the EUR/USD has failed to tackle 4/30 highs, and could be declining to set a 3rd bottom in a head and shoulders formation. The keys to success in a continuation of the uptrend will be staying above 4/30 and 3/30 lows. If the 2nd key doesn’t hold, we could witness a subsequent sharp movement to the downside. Intraday, we are seeing the inflection point of our 3rd tier downtrend line and 2nd tier uptrend line. The inflection point occurs just below our 1.3208 support and just above 4/30 lows, highlighting the near-term significance of this level. Meanwhile, the EUR/USD will need a surge in volume to the upside to plow through 4/30 highs. Although we may see further weakness in the near-term, we maintain our bullish outlook on the EUR/USD until the aforementioned keys are broken.
The EUR/USD released weaker than expected German Retail Sales and Sentix Investor Confidence numbers earlier today. However, we don’t view the data as game changing, particularly German Retail Sales since it tends to fluctuate within a reasonable range and the German economy is more manufacturing-focused. FX investors will be paying closer attention to America’s Pending Home Sales release in a few hours. Analysts are expected continued stabilization in this area, and the data is heavily-weighted since the economic crisis began with a malfunctioning housing market. We expect to EUR/USD to remain positive correlated with the S&P futures for the next few sessions as investors eagerly await the ECB’s meeting on Thursday.
The ECB’s meeting on Thursday will be critical since the ECB governors have offered various opinions as to the direction of the central bank’s monetary policy. The ECB has maintained its benchmark rate at a respectable level while avoiding liquidity measures such as quantitative easing. The uncertainty among investors could keep any uptrend in check as investors eagerly await results from the meeting. The ECB’s announcement will come on the same day as America’s stress test results, meaning we expect to see a large spike in volatility on Thursday.
Fundamentally, we maintain resistances of 1.3236, 1.3295, 1.3329, 1.3389, and 1.3420. To the downside, we hold supports of 1.3208, 1.3170, 1.3127, 1.3089, and 1.3039. The 1.30 area serves as a psychological cushion with 1.35 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3231.
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