By Fast Brokers – The EUR/USD is continuing Friday’s sell-off stemming from the SEC’s action against Goldman. The UK and Germany are initiating investigations of their own, meaning these headlines could be clogging the headlines for quite a while. The SEC’s investigation serves as a defense for financial legislation and is worrying investors that whatever bill is passed could be more constrictive than anticipated. Hence, we’ve seen a pullback in the risk trade across the board in reaction, supported by investors rushing to the Yen. In addition to the Goldman news, China has taken its most aggressive action to prick its real estate bubble by forbidding banks from providing loans for 3rd home purchases. Therefore, the Chinese government is showing no signs of releasing its grip on the banking sector, particularly since housing prices increased by over 10% in March. Altogether, fear of regulation in the U.S. coupled with fear of an economic slowdown in China is leading investors towards the Dollar and the Yen. On a positive note, Citigroup earnings topped estimates and the risk trade is bouncing a bit right now in reaction to this news. Meanwhile, investors shouldn’t forget about Greece even though the spotlight has shifted. If psychological conditions don’t improve in either China or the U.S., another Greece debt scare could topple the EUR/USD. However, this is all heresy and what we can say is that the EUR/USD is still trading above some key March and April lows. Therefore, even though the risk trade has been pummeled the last two session, the EUR/USD can still salvage its uptrend should psychological forces make an about face. The EU will release its ZEW Economic Sentiment data tomorrow and a positive showing could help turn the negative tide. Meanwhile, earnings will continue to flood in with tech bellweathers reporting throughout the week. As a result, this could prove to be a very active trading week.
Technically speaking, the EUR/USD has fresh uptrend lines serving as technical cushions along with intraday and 3/31 lows. As for the topside, the psychological 1.35 now becomes a technical barrier along with an accumulation of downtrend lines and 4/9 highs.
Present Price: 1.3461
Resistances: 1.3473, 1.3485, 1.3496, 1.3506, 1.3521, 1.3530
Supports: 1.3455, 1.3442, 1.3431, 1.3423, 1.3416, 1.3401
Psychological: April highs and lows, 1.35, 1.34
(click chart to enlarge)
Market Commentary provided by Fast Brokers.
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