By Fast Brokers – The Sell off in the EUR/USD is proceeding at a persistent, yet accelerated pace as it makes 100 basis points look like a standard movement. Rhetoric concerning the viability of the EU is heating up with prominent figureheads making their thoughts known, including Volcker, Bernanke, and King. The vocal hesitancy from well-respected economists and central bankers has investors second guessing the effectiveness of last weekend’s $1 trillion EU rescue package. Hence, the selloff is the EUR/USD is gaining steam, dropping below 5/6 lows and its highly psychological 1.25 level. Portugal joined Spain in announcing the implementation of austerity measures to reign in budget deficits. Although this could prove to be good news concerning the long-term health of the EU, analysts and investors fear that austerity measures could hamper economic growth to an effect that contradicts the very purpose of the $1 trillion package. Hence, the legitimacy of the EU has been thrown into question and the Euro is suffering as a result. Most disconcertingly, the $1 trillion price tag doesn’t seem to be having its designed purpose, which is ridding the market of speculators. The EU didn’t release any pertinent economic data today, allow psychological forces to control today’s price action. Not that this would matter since the EUR/USD has shrugged off this week’s encouraging EU prelim GDP figures. Meanwhile, investors are waiting on U.S. prelim UoM consumer sentiment data. Retail sales and industrial production printed a little bit above expectations, though the numbers aren’t anything to get overly excited about. The story of the EUR/USD remains the fiscal problems in the EU and finance ministers are hoping a weekend break will cool down speculation.
Technically speaking, the EUR/USD clearly faces an uphill battle with a wealth of downtrend lines hanging over head. Additionally, the EUR/USD faces technical barriers in the form of intraday, 5/12, and 5/13 highs along with the psychological 1.25 level. As for the downside, the EUR/USD has a limited near-term support system in the form of October 2008 lows and its psychological 1.23 area.
Present Price: 1.2457
Resistances: 1.2480, 1.2521, 1.2544, 1.2581, 1.2622, 1.2652
Supports: 1.2456, 1.2432, 1.2405, 1.2372, 1.2329
Psychological: May 2010 lows, March 2009 lows, October 2008 lows,1.26, 1.25, 1.24, 1.24
(click chart to enlarge)
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