By Fast Brokers – The EUR/USD is settling and cooling as investors take a step back to revise their outlooks in the wake of last week’s aggressive selloff in the risk trade. Trichet attempted to alleviate investor uncertainty by reassuring markets that the ECB and EU will make sure Greece takes care of its deteriorating fiscal situation. Meanwhile, the data wire is relatively quiet until China releases its New Loans and Trade Balance data. Hence, the FX markets have an opportunity to settle down over the next 24 hours should no new conditions flare up. However, unions in Greece are threatening to strike on Wednesday as the government announces its plans for reducing the nation’s outstanding fiscal debt. Should unrest swell in Greece this could disrupt markets once again. That being said, the risk trade is still in a fragile state with downward pressure bearing down on the EUR/USD. Meaning the EUR/USD will likely need a positive turnaround in fundamental data or an optimistic psychological shift to counter current negative forces. The EU will remain quiet on the data wire until Friday’s German Prelim GDP, implying the Euro could follow the path of the Dollar for the time being barring any significant developments regarding Greece. Speaking of EU data, Germany had a poor showing last week with Industrial Production and New Orders missing estimates. Hence, it will be interesting how Germany’s Prelim GDP turns out at the end of the week.
Technically speaking, the EUR/USD faces topside technical barriers in the form of multiple downtrend lines along with intraday, 2/5 highs. As for the downside, we’ve created a few new uptrend lines to serve as technical cushions along the psychological 1.35 level and May 2009 lows. On a negative note, our uptrend lines now run through February 2009 levels, or the 1.27 area. Hence, the EUR/USD’s downturn this month could signal a more lasting, medium-term decline.
Present Price: 1.3675
Resistances: 1.3693, 1.3721, 1.3744, 1.3781, 1.3806, 1.3831
Supports: 1.3650, 1.3628, 1.3610, 1.3587, 1.3563
Psychological: May 2009 lows, 1.35
(click chart to enlarge)
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