The EUR/USD has continued to climb beyond our 3rd tier downtrend line as we anticipated. As we mentioned in yesterday's analysis, we view the movement past our 3rd tier and September highs as a key development in regards to a new leg up for the currency pair. The EUR/USD is not hovering around 8/21/08 highs and appears poised to take a crack at the highly psychological 1.50 level. There's not much historical resistance above 1.50, meaning the EUR/USD's near-term gains could accelerate towards 1.55 should 1.50 fail to sufficiently deflect the currency pair. Meanwhile, the EUR/USD is building up quite a few technical cushions during its ascent, including multiple uptrend lines and sets of higher lows. However, the psychological 1.50 zone could prove to be a challenging immediate-term barrier should it be tested. Additionally, the S&P futures are approaching their own highly psychological 1100 level. Therefore, the EUR/USD's rally may hit a speed bump as the currency pair and several of its correlations test psychological barriers. Regardless, the technicals are pulling in favor of the EUR/USD's uptrend even though this week's ZEW data was disappointing.
Speaking of data, the EU printed an Industrial Production number in line with analyst expectations. The EU will keep the ball rolling tomorrow by releasing CPI data. EU consumer prices have registered negative growth for the past three months and analysts are expecting another subpar showing of -0.3%. The destruction of CPI prevents the EU from approaching its monetary policy with as hawkish of an attitude as the central bank may prefer. However, despite the negatively mixed EU data as of late, the U.S. released stronger than expected Retail Sales today and China reported an improvement in both export and import activity. Furthermore, earnings from bellweathers Intel and JPMorgan toppled analyst expectations. The S&P futures have responded by rising beyond 1075 and are in the midst of setting fresh 2009 highs. Overall, both Q3 earnings and U.S. econ data are coming in above analyst expectations, a positive catalyst for the EUR/USD's uptrend due to the negative correlation between U.S. equities and the Greenback.
We have reason to believe the EUR/USD's upward movements could accelerate over the next 24-48 hours, especially if U.S. data and earnings continue to flow in better than expected. However, the mixed EU econ data is a cause for concern and may be addressed next week if fundamental conditions don't show signs of improvement. Additionally, the longer EU data sends mixed signals, the longer the ECB will leave its major alternative liquidity measures intact. Meanwhile, keep an eye on the S&P's interaction with 1100 should it be reached since this may hint at how the EUR/USD would deal with 1.50.
Present Price: 1.4897
Resistances: 1.4905, 1.4946, 1.4981, 1.5013, 1.5052
Supports: 1.4875, 1.4845, 1.4830, 1.4800, 1.4758, 1.4722