EUR/USD is looking to recoup some of yesterday's losses after ZEW Economic Sentiment data blew past expectations and registered expansion (50+). However, gains are being contained by weak PPI and housing data from the U.S. The S&P futures have also been under considerable downward pressure as investors cash in on overbought conditions. Europe's impressive sentiment reflects the better than expected GDP data we saw last week. Therefore, EU economic prospects are improving as prices contract and expenses become more reasonable. Unfortunately, U.S. numbers are crashing the party and the S&P futures are back below 1000 again. Hence, the EUR/USD's upward mobility could be limited until U.S. equities settle down.
Meanwhile, the EUR/USD has managed to avoid a retest of its highly psychological 1.40 level as sell-side volume remains on the tame side. The currency pair is balanced on our 1st tier uptrend line as it approaches an inflection point with our 1st tier downtrend line. Our 1st tier uptrend line carries some weight since it connects through July lows. Hence, a collapse of our 1st tier uptrend line could signal a retreat towards 1.40 and 7/29 lows. Fortunately for bulls, 1.38-1.40 has a lot of historical consolidation, meaning this trading zone should prove to be reliable if it is encountered. As for the upside, there are considerable barriers due to the EUR/USD's recent deterioration. These include our 1st and 2nd tier downtrend lines along with intraday highs and the 1.4180-1.42 area.
The S&P futures could have some more room to go to the downside if they don't make a solid effort to pop back above our 2nd tier uptrend line. Furthermore, crude has had a difficult time as of late. Therefore, the next two sessions will be important for the EUR/USD and its correlations to regain their footing in order to build a new base for a leg up. The EU will release some more PPI and current account data tomorrow. However, investors will likely look forward to Friday's slew of PMI data along with U.S. Existing Home Sales. The breather could help the EUR/USD stabilize before Friday's busy session.
Present Price: 1.4113
Resistances: 1.4120, 1.4138, 1.4155, 1.4164, 1.4180
Supports: 1.4108, 1.4092, 1.4070, 1.4060, 1.4043