By Fast Brokers
The EUR/USD has climbed steadily through all of our trend lines, 1.40, and is currently trading just above May 22 highs. This is a very bullish move, and it appears the currency pair is on the verge of a near-term breakout to the upside. The key will be sizable volume backing today’s movement. Today’s gains come despite a lower than expected CPI reading from the EU, meaning traders are feeding off of a strengthening S&P. Investors also saw stronger than expected German retail sales and M3 money supply. The rising M3 combined with a stabilizing economy means the ECB can feel more comfortable about maintaining their benchmark rate at its present level, with the possibility of rate hikes down the road. We also need to keep in mind that the ECB has played their cards conservatively as compared to the central banks of Britain and the U.S. Therefore, the Euro is in a relatively advantageous position to appreciate in the near-term should global economic conditions continue to improve. What has transpired over the last 24 hours seems to confirm our consistent bullish outlook. Though we may see a little weakness today due to intermittent profit-taking, the EUR/USD is making a clear statement. Meanwhile, our 1st tier downtrend and 1st and 2nd tier uptrend lines are all reaching an inflection point late Friday/early Monday. Therefore, we anticipate volume to pick up over the next few trading sessions.
With the EU finished for the week, investors will be paying close attention to U.S. equities and the release of Prelim GDP, Chicago PMI, and Revised Univ. of Mich. Consumer Sentiment. Should these data points beat analyst expectations and U.S. equities react positively this would only provide more fuel to the EUR/USD’s uptrend due to the strong positive correlation. In fact, the fundamental movements of the EUR/USD and the GBP/USD could be sending a message that U.S. equities are positioned for a breakout of their own. With economic data trending upwards around the globe, we are seeing a return to risk, which bodes well for the EUR/USD. We maintain our bullish outlook on the EUR/USD trend-wise due to the aforementioned reasons.
Fundamentally, we find resistances of 1.4078, 1.4117, 1.4187, 1.4222, and 1.4290. To the downside, we see supports of 1.4024, 1.3991, 1.3955, 1.3922, and 1.3889. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4070.
Market Commentary provided by Fast Brokers.
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