The EUR/USD is consolidating after logging key gains on Friday. Although the movement wasn't large pip-wise, the EUR/USD peaked through our 1st-3rd downtrend lines and briefly traded above 12/17 highs. As we mentioned in our previous analysis, our medium-term downtrend line (now our 1st tier) runs through January highs, or the 1.4575 area. Hence, Friday's gains could signal a more lasting uptrend taking shape. Additionally, our 2nd and 3rd tier downtrend lines run through the 1.39 zone. Therefore, both near-term and medium-term technicals are beginning to work in favor of the EUR/USD. The currency pair has built up a solid base over the past month, creating what could be a solid support system should things go awry. The Cable is in the midst of similar trend setting movements, meaning the risk trade could be a confirmation away from establishing a new near-term uptrend. However, there are some key economic events on deck, so we will have to see whether fundamentals support Friday's technical breakout. The U.S. will remain in focus today with the Empire Index, Capacity Utilization, Industrial Production, and TIC Long-Term Purchases. If today's data tacks onto Friday's encouraging Retail Sales data then the risk trade could receive another top-side boost. Tomorrow the EU will release ZEW Economic Sentiment and CPI. It will be interesting to see whether the recent uptrend in CPI continues. If so this could benefit the Euro since investors may find it hard to rationalize additional liquidity injects from the ECB. The Fed is on deck Tuesday, meaning volatility could really heat up. Investors will be looking to see if there is a change in the central bank's language regarding its loose monetary policy for the foreseeable future.
Technically speaking, the EUR/USD faces multiple downtrend lines along with 3/12 and 2/9 highs. As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with 3/12 and 3/10 lows. Meanwhile, the psychological 1.35 area becomes a technical cushion while 1.40 serves as a key psychological barrier.
Present Price: 1.3750
Resistances: 1.3756, 1.3775, 1.3796, 1.3813, 1.3834, 1.3857
Supports: 1.3728, 1.3713, 1.3691, 1.3672, 1.3654, 1.3637
Psychological: March and February Lows, 1.35, 1.40, February highs