By Fast Brokers – The Euro logged large losses today as Merkel and Trichet continue to emit words of caution concerning the state of Greece’s troubled economy. Meanwhile, we noticed signs of tighter liquidity in China dragged the AUD/USD lower as investors speculated that a slowdown in China could decrease demand for Australia’s exports. Furthermore, U.S. economic data printed poorly today, adding onto the risk-aversion we witnessed earlier in the trading session. We recognize declines in gold and the S&P futures as well. Hence, today’s pullback in risk-oriented investment vehicles is wide spread and the Euro is leading the way. The extent of the Euro’s weakness is highlighted by a huge leg down in the EUR/GBP. Data wise, although EU Core CPI printed a basis point hotter than analyst expectations, the EU Trade Balance came in surprisingly weak. Therefore, it seems demand for EU exports is waning, certainly not a helpful fundamental development considering the downward pressure on the Euro today. On the other hand, a pickup in Core CPI could hold the ECB off from increasing liquidity since EU prices are stabilizing. However, Trichet’s comments at this week’s ECB press conference were a bit more dovish than last month. Hence, investors are beginning to speculate that the ECB may hold off on tightening liquidity until 2H. Although the data wire is relatively empty on Monday, the EU will release its German ZEW Economic Sentiment figure on Tuesday. Hence, volatility could continue next week.
Technically speaking, the EUR/USD has been driven beneath our 2nd tier uptrend line, a negative technical development. However, the currency pair does have our 1st tier uptrend line waiting below. Our 1st tier uptrend line could prove to be a key test for the EUR/USD should it be reached since the line runs through previous January lows. As for the topside, the EUR/USD faces multiple downtrend lines along with 1/5 and 1/11 highs along with the psychological 1.45 level.
Present Price: 1.4367
Resistances: 1.4400, 1.4427, 1.4460, 1.4474, 1.4499, 1.4520
Supports: 1.4351, 1.4328, 1.4310, 1.4289, 1.4264, 1.444
Psychological: 1.45, December highs and January lows
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