By Fast Brokers
EUR/USD
The EUR/USD is stabilizing after dipping below 5/11 lows yesterday. Wednesday’s pullback came on sizeable volume, yet we wouldn’t consider it a significant movement. The EUR/USD has managed to steer clear of the psychological 1.35 level with its upward momentum intact. On a cautionary note, the currency pair has dropped beneath our 1st tier downtrend and failed to eclipse March highs on 5/13. Therefore, we wouldn’t be surprised to see a near-term struggle as the S&P battles 900.
Investors are eagerly anticipating data releases from the EU tomorrow since the region has been relatively quiet on the economic news front lately. The EU will release German and French Prelim GDP, EU Flash GDP, and CPI. The U.S. will also release CPI data of its own along with manufacturing data. Therefore, we expect volatility to pick up tomorrow.
One week after the ECB acted in rare unison to lower rates and purchase covered bonds, several governors have gone public with their discontent and seem defiant to avoid diving head first into quantitative easing. The return of instability in the ECB could cap gains in the EUR/USD since investors dislike uncertainty concerning future monetary policy. However, we’ve seen Britain’s quantitative easing policy have a positive impact on the Pound since the program’s inception. Therefore, investors may not be concerned of negative near-term downward pressure on the EUR/USD if the ECB does decide to expand its present alternative liquidity operation.
If tomorrow’s data releases disappoint analysts and investors, keep an eye on 1.35. For if this psychological cushion is pushed aside, we could see a sharp, near-term selloff towards 3/25 lows. On the flipside, if the news is better than expected and investors react positively, watch for March highs. If March highs are conquered, we could see a nice, near-term pop. We maintain our bullish outlook trend wise unless 1.35 is taken out.
Fundamentally, we find resistances of 1.3639, 1.3659, 1.3701, 1.3737, and 1.3776. To the downside, we see supports of 1.3604, 1.3579, 1.3554, 1.3522, and 1.3497. The psychological cushion sits at 1.35 with a psychological barrier waiting above at 1.40. The EUR/USD is currently exchanging at 1.3624.
Market Commentary provided by Fast Brokers.
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