By Fast Brokers
The EUR/USD hit solid resistance in the 1.43 area yesterday as we anticipated, and has pulled back below 1.4222 resistance. Today’s retreat is accompanied by declining volume, indicating the move may be one of consolidation carrying little weight. Yesterday’s trend line inflection point was followed by a pop, but no fundamental movement. However, we wouldn’t be surprised to see the inflection move lag a day or two, so investors should be on their toes. If the EUR/USD can climb above 12/29 highs and our 1.4374 resistance we could witness another near-term breakout. As for the downside, if our 1.4117 support doesn’t hold we could witness a retracement towards 1.40. Investors shouldn’t be too discouraged by consolidation since the medium-term downtrend lines were laid to rest a while ago.
Naturally, investors are highly anticipating Thursday’ ECB news conference. While the central bank is expected to hold its benchmark rate at 1%, the ECB has been prone to surprise investors in an effort to impact the Euro. The investment world will be paying close attention to how Trichet addresses the ECB’s purchase of covered bonds, and whether the EU plans to venture into more extensive alternative liquidity measures, such as quantitative easing. The EU continues to have lingering economic problems, likely due to the scattered composition of the union. The relatively mixed performance of the EU economy has led to a comparatively weak appreciation of the Euro against the Dollar. The EUR/GBP continues its freefall, and it seems there’s more room to go on the downside. Regardless, the EUR/USD is reaping the rewards of a return to a pre-crisis economy, or a very weak Dollar and pricey crude.
Some heavily-weighted U.S. economic data will be hitting the wires today, including the ADP Non-Farm Employment Change, ISM Non-Manufacturing PMI, Factory Orders and weekly Crude Oil Inventories. Therefore, volatility could kick in pretty quickly. The S&P and crude futures are drifting lower this morning, indicating a synchronized pullback. However, we wouldn’t be surprised to see the weakness turn around quickly, especially if today’s economic data should beat analyst expectations. We maintain our bullish outlook trend-wise on the EUR/USD until further notice.
Fundamentally, we maintain our resistances of 1.4222, 1.4290, 1.4325, 1.4374, and 1.4432. To the downside, we hold our supports of 1.4187, 1.4117, 1.4078, 1.4024, and 1.3987. The 1.40 area serves as a psychological cushion with 1.45 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.4201.
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