By Fast Brokers – The EUR/USD is extending Friday’s pullback and the currency pair is trying to bottom above its psychological 1.25 level as EU finance ministers meet to discuss their plans for revealing stress test results at the end of the month. Details of the stress test are still vague, leaving investors a bit on edge ahead of the release. The EUR/USD has responded by pulling back from monthly highs, though losses have been contained thus far. Meanwhile, investors also reacting to a solid trade surplus result this weekend from China. The figure indicates that China’s export sector has fully recovered from the crisis and the Yuan is appreciating slightly in reaction to the news. While the trade surplus is normally a positive for the risk trade, imports revealed a decline in imports of iron ore and coal, hinting that China could be slowing. Either way, the number is encouraging and allows the risk trade to remain within the bounds of its near-term uptrend. The EU will contribute to the data wire again tomorrow by releasing economic sentiment figures. Investors are expecting a decline in the German ZEW to 25.2. Expectations for economic and investors sentiment have been lowered due to the fiscal crisis. That being said, if the number tops estimates this could give a solid boost to the EUR/USD. Meanwhile, U.S. earnings season will be kicking off with Alcoa after the bell. If fiscal problems in the EU have had a large noticeably large negative impact on U.S. earnings then this could weigh on the EUR/USD and risk trade as a whole. Hence, we can expect an active week as investors digest earnings and outlooks for the coming quarter.
Technically speaking, the EUR/USD faces technical barriers in the form of 7/6 and 7/9 highs. As for the downside, the EUR/USD has supports in the form of intraday and 7/6 lows. Additionally, the psychological 1.25 level could serve as a solid technical cushion should it be tested.
Present Price: 1.2572
Resistances: 1.2584, 1.2608, 1.2635, 1.2655, 1.2673, 1.2686
Supports: 1.2540, 1.2519, 1.2497, 1.2479, 1.2453, 1.2435
Psychological: July highs and lows, 1.25, 1.30
(click chart to enlarge)
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