The EUR/USD's upswing continued yesterday, yet hit a will just beneath the highly psychological 1.50 level as anticipated. The EUR/USD failed to fully participate in the equity rally and has formed a double top with a pop in volume on a 4 hour down-bar. We notice similar weakness in gold while the EUR/GBP has been hit with huge losses over the past 24 hours. The best explanation for the Euro's present weakness is overbought conditions combined with headwinds at 1.50. As we mentioned previously, 1.50 serves as the last noteworthy technical barrier separating the EUR/USD from accelerated near-term gains towards 1.55. On a positive note, the EUR/USD is still trading above September highs and has multiple uptrend lines to break its fall. Therefore, there are far fewer obstacles separating the EUR/USD from the topside than the downside. We've attached a few makeshift downtrend lines running through weekly highs to give investors an idea of immediate technical barriers separating present price from intraday highs and 1.50.
Meanwhile, Q3 earnings and U.S. data are ending the week on a sour note with BofA and GE reporting weaker than expected revenue figures. Furthermore, IBM is selling on the news despite reporting better than forecast. The S&P futures are trading off by nearly 1% in reaction after failing to test their own psychological 1100 level. Therefore, it seems the EUR/USD's stronger positive correlations are facing psychological headwinds as well. Regardless, the currency pair made some very bullish moves earlier this week, and there is presently insufficient evidence to contradict this observation. On the other hand, the ECB is increasing its chatter concerning the importance of a stronger Dollar since EU exporters are having trouble shipping products with an appreciated Euro. Hence, if the Dollar were to continue its broad-based devaluation the ECB may be inclined to keep the gates of liquidity open for longer. However, we're not at that point yet, so investors should keep their attention centered on technicals and fundamentals.
The EU will be relatively quiet on the data front until late next week, particularly when the union releases Flash PMI data numbers along with Ifo Business Climate data. Until then focus should remain on Q3 earnings and U.S. econ data along with China's data flow on Wednesday. China has been an engine in the global economic recovery, so Wednesday's GDP and Industrial Production data could make or break the current risk trade. We believe China's data will meet or beat and should provide a positive catalyst to global markets. As for the time being, investors should keep an eye on U.S. equities and gold. Further weakness in the S&P futures could apply downward pressure on the EUR/USD until we get more data.
Present Price: 1.4878
Resistances: 1.4905, 1.4946, 1.4981, 1.5013, 1.5052
Supports: 1.4875, 1.4845, 1.4830, 1.4800, 1.4758, 1.4722