A strong fundamental report drove the EUR USD higher on Thursday. Following three days of lower-lows, the Euro came back with a vengeance as the European Commission€™s gauge of economic sentiment posted stronger-than-expected results.

Shorts covered following the news as it somewhat diminished Wednesday€™s comments from a European Central Bank member calling for the possibility of an interest rate cut to below 1%. Shorts were pricing in a rate cut on expectations of a worsening Euro Zone economy. Although today's report still showed that consumer confidence was down, the improvement in the retail confidence index indicated that consumers are still willing to spend.

Technically, this market is at a critical juncture. Based on the longer-term charts, 1.4184 is still key 50% retracement resistance. Last week's high at 1.4050 has also been flagged as a main top on the swing chart because of the four day decline. A failure to penetrate this area will indicate that the selling is greater than the buying at the current price levels.

The action over the past few days indicates how sensitive this market is to news. The recent violent swings in the market have for the most part been triggered by speculation. With the next ECB meeting coming up on June 4, traders will begin to look for more solid information to use in order to determine the direction of the ECB committee members.

Upside momentum is slowing down in the GBP USD as buying has diminished near a key 50% retracement price at 1.6085. This price is critical to the structure of the current rally as it will dictate how much further this market could rally. If this market can establish support above 1.6085, then it has a great chance of continuing the rally to 1.6694.

Because of the size of the recent rally without any economic substance, traders have been reluctant to add to established positions at current levels. In addition, some traders do not seem too interested in initiating new positions at current levels until the market makes a correction.

Traders are also starting to become concerned about the strong surge in U.S. interest rates. Downside pressure could be building in the Pound on the thought that higher U.S. yields will attract foreign investors seeking a higher return. The problem is that higher yields could also raise concerns over the U.S. ability to fund its growing debt.

News that Japanese investors bought more foreign assets last month drove the USD JPY sharply higher on Thursday. Declining global tensions and signs that the global recession may be bottoming fueled Japanese investor demand for higher yielding assets. This move should be welcome news for the Bank of Japan which has been looking for lower Yen prices in order to stimulate the export market.

Technically, the main trend turned to up on the swing chart when the market broke through the swing top at 96.69. The buying pressure landed this market inside of a major retracement zone at 96.79 to 97.49. Now that the news is out and the market has reached this retracement zone, long-side gains may be limited to the upside. Watch for profit-taking to begin especially if this market rallies all the way to 97.49.

Please do not hesitate to contact us at 1-800-971-2440, with any questions.

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.