By Fast Brokers – The EUR/USD has taken a turn for the worse to start off the week. Despite the relative lack data, the news wire lit up as we warned about in our previous commentary. Concern about Spain’s financial condition intensified after the government announced it is taking control of a regional bank, sparking fears that more financials could begin folding. The IMF issued a warning to Spain that the financial industry needs to get its act together, escalating investor uncertainty in the process. Investors naturally sent the Euro reeling in reaction to the news and the EUR/USD is back around previous May lows and testing March 2006 levels. All reasonable uptrend lines are well overhead and negative momentum is still clearly in the driver’s seat. On a positive note, EU industrial new orders surged, eclipsing analyst estimates by 30bp. Strong EU industrial and manufacturing data could become a new trend as a weak currency makes exports more attractive. However, austerity concerns are still dominating the headlines. Meanwhile, global equities are getting hammered with the DAX down -3% and the CAC in the red by roughly -3.7%. In addition to news regarding Spain, investors are concerned about a conflict in Korea after news spread that North Korea readied its military to defend against South Korea should it attack. Hence, it’s difficult to find much good news around the globe, making present risk aversion understandable.
Technically speaking, the EUR/USD faces multiple downtrend lines along with intraday and 5/24 highs. Additionally, the psychological 1.23 and 1.24 areas are now serving as technical barriers. As for the downside, the EUR/USD has supports in the form of intraday and 5/19 lows. Furthermore, the psychological 1.20 could serve as a solid cushion should it be tested.
Present Price: 1.2224
Resistances: 1.2239, 1.2268, 1.2280, 1.2304, 1.2318, 1.2341
Supports: 1.2208, 1.2191, 1.2167, 1.2146, 1.2120, 1.2100
Psychological: May 2010 lows, March 2006 lows, 1.24, 1.23, 1.20
(click chart to enlarge)
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