The EUR/USD has failed to top 1.50 once again and the level is having as much psychological influence as we anticipated. 1.50 separates the EUR/USD from consolidation and exciting near-term gains. The currency pair has toppled the rest of our foreseeable near-term obstacles, leaving 1.50 as the final test for the bulls. Meanwhile, the Cable has approached 1.65 and is a close downtrend line away from making another run itself. Furthermore, the S&P futures are battling 1100 while crude stares down $80/bbl. Not to mention the USD/JPY is trading just around its highly psychological 90 level. Hence, we are clearly at a critical juncture in terms of the longevity of the present bull market. Technicals are pointing in favor of a continuation of the uptrend, while fundamentals are sending mixed signals. German and U.S. PPI data came in below analyst expectations, indicating the massive injections of liquidity have not triggered inflation yet. Therefore, the ECB, BoE, and the Fed have less incentive to drain their QE packages despite mounting political pressure.
Trichet and the ECB reiterated their desire for a stronger Dollar, and are hoping the Fed will do its part to counter the Dollar's demise. If not, the ECB may be inspired to take a more hawkish monetary stance in order to defend the interests of its critical manufacturing hub. Hence, psychological forces are beginning to work against the EUR/USD's uptrend. However, the ECB is all talk for right now, and the EUR/USD may be allowed to head towards 1.55 before the central bank is inclined to take more definitive action.
Meanwhile, Q3 earnings are printing better than expected, confirming the belief that the global economy is stabilizing. The EU will be quiet on the data-front until Thursday's Current Account Balance release. The EU's Current Account turned positive last month for the first time since April 2008. Investors will be looking for another optimistic release of 4.3 Billion. However, the more important EU releases will be the Friday's wave of PMI data. For the time being, investors will be paying particularly close attention to BoE Governor King's public address this afternoon along with and important set of China econ data Wednesday night EST. China's upcoming data releases could be the make or break in regards to the continuation of the EUR/USD's uptrend. Positive China econ data would likely further encourage investors to put their money into higher risk trades such as the EUR/USD and AUD/USD. Since we are expecting China to outperform, the EUR/USD may very well experience another leg up barring any hawkish commentary from the ECB.
Technically speaking, recent behavior of the EUR/USD and its correlations is more supportive of further movements to the topside than the downside. However, tides can change quickly, so investors should be on their toes since we are at a critical juncture across the board. The EUR/USD's current topside obstacles are the psychological 1.50 level and our three downtrend lines. As for the downside, the currency pair has multiple uptrend lines serving as technical cushions along with 10/19 and 10/13 lows.
Present Price: 1.4970
Resistances: 1.4981, 1.5013, 1.5052, 1.5086, 1.5127, 1.5146
Supports: 1.4942, 1.4921, 1.4880, 1.4860, 1.4834, 1.4800