The EUR/USD has popped off our 2nd tier uptrend line and is trying to set a bottom above December lows as the Dollar experiences broad-based weakness. Equity markets are looking up for the first trading session of 2010 and investors are favoring the risk trade after encouraging economic data from Britain. The improvement in Britain’s Manufacturing PMI and Net Lending to Individuals yielded a pop in both the Cable and the EUR/USD with investors regaining confidence in the global economic recovery. The U.S. has ISM Manufacturing PMI data on deck, which could also prove to be a market mover. Speaking of Manufacturing PMI, China’s beat analyst estimates on January 1st, showing the recovery in the world’s 3rd largest economy has not slowed. Although investors will receive another wave of data tomorrow, including the EU’s CPI Flash Estimate, more attention will likely be paid to America’s ADP Non-Farm Employment Change. Most of the excitement in the Dollar can be attributed to America’s turnaround in employment data. Hence, investors will likely focus in on Wednesday’s ADP release.
Technically speaking, the EUR/USD still faces multiple downtrend lines along with the psychological 1.45 level, 12/29, 12/23, and 12/18 highs. Hence, some challenging near-term topside technicals are in place due to the EUR/USD’s December downturn. As for the downside, the EUR/USD has technical cushions in the form of our 1st (off chart) and 2nd tier uptrend lines along with intraday and 12/22 lows. However, the EUR/USD is still trading well below our 3rd tier uptrend line that runs through July lows, meaning the currency pair could be in for more losses over the medium-term towards the psychological 1.40 area should economic data outside of the U.S. continue to recover.
Present Price: 1.4392
Resistances: 1.4401, 1.4430, 1.4454, 1.4478, 1.4509, 1.4540
Supports: 1.4371, 1.4348, 1.4323, 1.4303, 1.4272, 1.42464187
Psychological: 1.45, 1.40, December and September Lows