By Fast Brokers – The EUR/USD is getting pummeled after the IMF’s Director joined the party in issuing a negative comment concerning the state of Greece’s economy. Greece’s poor economic state is hammering the Euro, exemplified by a huge downturn in the EUR/GBP. Furthermore, the setback in this week’s Economic Sentiment data wasn’t much help. Meanwhile, China’s tighter monetary policy stance is worrying investors that this may have a discernable impact on global growth should the central bank continue its course. During today’s U.S. trading session Building Permits registered an encouraging increase while inflation remained in a sedated state. The bump up in Building Permits has yielded strength in the Dollar so far and gold has taken a step down. Strength in the U.S. economy amid instability in the EU and tightening from China leads investors to favor the Dollar over its major crosses. However, earnings have been negatively mixed thus far. Should this earnings season disappoint this could stabilize the Dollar since investors would expect the Fed to maintain a loose monetary policy. That being said, it seems currencies may continue to behave on their own fundamentals, particularly the Euro until the full ramifications of Greece’s debt problem is realized. Attention will now turn to China’s GPD and Industrial Production data tomorrow. China’s recent efforts to tighten liquidity imply strong economic data coming. While one would expect this to have a positive impact on the risk trade, should China’s economic data far exceed expectations then investors may anticipate China’s tightening to pick up pace, a negative development for the risk trade. Regardless, volatility could remain at a heightened state for the next 24 hours. The EU will release its Flash PMI data set tomorrow. Strong PMI data could help stem the bleeding in the Euro, whereas more weak economic data would likely place even more downward pressure on the currency.
Technically speaking, we’ve left our downtrend lines on the chart to give investors a clear picture in regards to the extent of the EUR/USD’s collapse. The EUR/USD is also dragging below our current 1st tier uptrend line, which runs through August lows, or the 1.38 area. Hence, there could be even more room to the downside over the near-term should the currency pair not hop back above this trend line soon. In the meantime, the psychological 1.40 area could serve as a technical cushion should it be tested. As for the topside, there are multiple downtrend lines we can form considering the pace of the EUR/USD’s pullback. Hence, the road to recovery looks like an uphill battle.
Present Price: 1.4135
Resistances: 1.4146, 1.4165, 1.4191, 1.4224, 1.4247, 1.4274
Supports: 1.4112, 1.4084, 1.4065, 1.4046, 1.4023, 1.3999
Psychological: 1.40
Market Commentary provided by Fast Brokers.
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