By Fast Brokers – The EUR/USD has staged a solid rally from Thursday’s lows as investors hope that a conference call between the G7 leaders will yield a sign of global solidarity amid the crisis in fiscal crisis taking root in the EU. Additionally, a much better than expected U.S. non-farm payrolls number has buoyed equities and the risk trade as a whole following yesterday’s collapse. As everybody knows right now, U.S. equities underwent a vicious selloff, leading investors towards the greenback, gold, and the yen for cover. In the meantime, EU bond interest rates climbed to uncomfortable levels and interbank lending dried up. This brought up not so distant memories of the market turmoil during the Lehman bankruptcy. The EUR/USD went on to test its psychological 1.25 level and March 2009 lows. The currency pair is skating on very thin ice now with October 2008, or financial crisis lows, coming into reach. Hence, it will be very important for the EUR/USD to stabilize soon to stem the bleeding and save some dignity. That being said, investors will have to see some action backed by confidence from the EU and other industrialized nations soon. Fortunately for the risk trade, the week is coming to a close and investors will have a couple days to cool off and look forward. China will be the key to stability next week for they kick off Monday with trade balance data, followed by CPI and industrial production on Tuesday. If China is in fact cooling off, this could place renewed downward pressure on U.S. equities and send the greenback higher. On the other hand, strong data from China could be just what the doctor ordered for the EUR/USD and other major dollar pairs.
Technically speaking, the EUR/USD is really testing its support system in for form of 1.25 and March 2009 lows. As for the topside, the EUR/USD faces an incredible amount of downward pressure along with intraday and 5/6 highs.
Present Price: 1.2673
Resistances: 1.2676, 1.2704, 1.2728, 1.2758, 1.2779, 1.2803
Supports: 1.2646, 1.2620, 1.2604, 1.2582, 1.2564, 1.2546
Psychological: March 2009 lows, October 2008 lows, 1.28, 1.27, 1.26, 1.25
(click chart to enlarge)
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