The EUR/USD has followed U.S. equities lower, dropping through our 4th tier uptrend line before tapping the psychological 1.45 level. Though the EUR/USD bounced off of our 1st tier downtrend line, the currency pair continues to drift lower as strong bearish forces take control of the market as a whole. We point out key technical declines in the S&P futures and the GBP/USD while the USD/JPY continues to drag towards January lows. Additionally, the 30 Year T-Bonds broke out through September highs while gold and crude tipped lower. Therefore, the markets are beginning to act in unison and are re-establishing correlations we've experienced since last year. EU econ data has been light this week, giving the currency pair more of an incentive to follow its positive correlation with the S&P futures rather closely. What little data we did receive from the EU provided little to cheer about. German Retail Sales came in 150 basis points below expectations and the EU unemployment rate printed in line with analyst expectations at 9.6%. However, fortunately for the Euro, the comparative lack of econ data has allowed the currency to recover its relative strength. The Euro is firming up against the Pound, and the EUR/GBP appears poised to take a stab at September highs. Additionally, the EUR/USD has the strongest technical backbone as compared to the GBP/USD and USD/JPY. Hence, even if the pullback in the S&P futures exacerbates and we witness a continual broad-based appreciation of the Greenback, the EUR/USD has more reliable set of near-term defenses to help break its fall.

That being said, the EUR/USD has multiple uptrend lines along with the psychological 1.45 level serving as technical cushions. However, a failure of our 1st tier uptrend line would likely yield a much more protracted downturn. Fortunately for bulls, our 1st tier is quite a ways away, yet investors should still keep the level in mind. For the time being, a second drop through our 4th tier uptrend line increases the probability of a sub-1.45 movement towards our bottom-end supports and 2nd tier uptrend line. Meanwhile, the EUR/USD should continue to follow its positive correlation with U.S. equities since the EU doesn't have a noteworthy data release until Monday's retail sales data. Even then, the Euro is looking at another dry week data-wise. Hence, correlations should be closely watched. The wild card in the deck is the ECB's monetary policy decision on Thursday. President Trichet made a semi-dovish statement for the first time in recent memory. Therefore, though the ECB may keep its present liquidity measures in line, investors will be looking for further evidence regarding the central bank's attitude towards the Dollar. Further defense of a stronger greenback could place some psychological downward pressure on the EUR/USD.

Our outlook on the EUR/USD trend-wise is growing sour by the day. Our negativity stems from the blatantly negative performances of both the GBP/USD and USD/JPY. Additionally, the S&P futures finally gave way to the downside after persistent defense by the bulls. The most disconcerting aspect of the situations is the amount of room the Cable and USD/JPY have to the downside. Should their last lines of defense give way, near-term declines could really pick up. Such a development would likely drag the S&P futures and the EUR/USD with it. Therefore, investors should keep a close eye on the technical supports of the EUR/USD's positive correlations. As for the topside, the EUR/USD will need some positive unemployment data from the U.S. today to turn the tide. The EUR/USD faces multiple downtrend lines along with Thursday highs.

Present Price: 1.4541

Resistances: 1.4563, 1.4584, 1.4608, 1.4630, 1.4656, 1.4677

Supports: 1.4541, 1.4519, 1.4501, 1.4479, 1.4462, 1.4437

Psychological: 1.45