The EUR/USD has undergone encouraging consolidation along what is now our 3rd tier uptrend line. Present consolidation comes with a sigh of relief considering the extent of the selloff in the EUR/USD thus far this week. Investors are encouraged by the better than expected Core DGO data even though the headline figure printed shallow by two basis points. Since the EU's economy relies heavily upon manufacturing, the solid Core DGO number signals that export demand from the U.S. may be stable. However, investors are still cautious since equity markets have been behaving unfavorably lately. The S&P futures have drifted below our important 1st tier uptrend line, and are presently testing the patience of the psychological 1050 level. Any extended weakness in the S&P would likely drag the EUR/USD lower due to their positive correlation. Therefore, investors should keep a close eye on U.S. equities over the next 24-48 hours and monitor their interaction with our technicals in reaction to key economic data. The U.S. will release its Advance GDP tomorrow, and this data will likely be a market mover. A disappointing GDP number would likely send U.S. equities lower and investors towards the Dollar for safety, and vice versa.
In addition to tomorrow's U.S. Advance GDP number, the EU will release German Unemployment Change data. Analysts are expecting an increase to 17k, likely due to the negatively mixed German PMI data as of late. The ECB has been quite these days, and the central bank is probably waiting to see how the next set of important econ data fares. Furthermore, the ECB should be happy that the EUR/USD has lost roughly 250 basis points from October highs. The pullback in the EUR/USD gives the ECB a little breathing room since the rapid appreciation of the Euro was beginning to squeeze EU exporters. Meanwhile, focus should remain on the U.S. since EU data will be relatively light until Friday's Unemployment Rate and CPI Flash Estimate releases.
Technically speaking, the sharp movement below the psychological 1.50 level is a discouraging sign for bulls. However, there remain several uptrend lines we can form, meaning the EUR/USD has a few technical cushions to rely upon before investors can safely cry bear. Our new 1st tier uptrend line should gauge whether the EUR/USD is bound to retreat towards previous October lows and the psychological 1.45 level. As for the topside, the EUR/USD now has multiple uptrend lines bearing down on price and the psychological 1.50 level becomes a technical barrier once again. Overall, although the uptrend remains intact, investors should tread carefully since U.S. equities are facing headwinds.
Present Price: 1.4797
Resistances: 1.4819, 1.4844, 1.4863, 1.4890, 1.4925
Supports: 1.4783, 1.4764, 1.4727, 1.4700, 1.4671, 1.4638
Psychological: 1.50, 1.45