The EUR/USD is consolidating between our trend lines as they creep towards their respective inflection points. The EUR/USD is trading lower this morning after America's headline Unemployment Rate came in two basis points higher than analyst expectations. However, the EUR/USD is bouncing off of our 1st tier uptrend line, and it appears the currency pair may opt to stay within the bounds of our trend line trading range. The U.S. markets will be closed on Monday for Labor Day, and trading should be thin today since many traders will take a long weekend.
The S&P futures are trading back above the 1000 mark again. The futures are exhibiting a form of resilience one would expect from such a psychological level. The S&P's gravitation towards 1000 is preventing the EUR/USD and other major Dollar crosses from breaking out in either direction. Meanwhile, the EUR/USD may stay relatively range bound until market optimists or pessimists win out. Investors are still very uncertain in regards to where the market is headed in the near-term. The S&P futures continue to hover around 1000 despite the fact that many analysts are calling for a modest pullback in equities.
The EU has a relatively light data week ahead and will leave the headlines to the U.S., China and Britain. Next Wednesday and Thursday could prove to be volatile sessions since China will release its Industrial Production data along with a BOE monetary policy decision. It is less certain how the BOE will approach its liquidity program as compared to the ECB. Hence, we could witness a pickup in volatility as the summer comes to a close. Investors will receive Germany Factory Orders on Monday and analysts expect a cool-down in growth from 4.5% to 2%.
Technically speaking, our trend lines are approaching their inflection points. The EUR/USD has interacted properly with our trend lines during its recent consolidation. Hence, we believe the inflection points should mark an increase in volatility. Our 3rd tier uptrend and downtrend lines play the largest trend-setting role on our chart. If our 3rd tier downtrend line fails, we anticipate a retest of August highs. On the flipside, a retracement below our 3rd tier uptrend line could result in a retest of August lows. Meanwhile, the 1.40 and 1.45 psychological patiently wait in opposite directions. Investors should keep a close eye on the S&P futures. If the S&P futures should continue their downward momentum and head below technical supports, the EUR/USD would likely exercise its positive correlation with U.S. equities, and vice versa.
Present Price: 1.4226
Resistances: 1.4246, 1.4266, 1.4287, 1.4301, 1.4326
Supports: 1.4224, 1.4208, 1.4197, 1.4168, 1.4154
Psychological: 1.40, 1.45