The EUR/USD's trading right around where we left it on Friday. The currency pair found strength once again just around our 2nd uptrend line, setting a slightly higher low than Thursday. However, downward forces remain since last week's global econ data ended on a sour note. German Retail Sales printed 12 basis points lower than analyst expectations, negating Thursday's positive Employment Change number. Furthermore, investors found that U.S. prices and personal spending continue to decline while Unemployment Claims remain at historically high levels. Therefore, unemployment and consumption are lagging behind the improvement in corporate earnings. Investors should keep in mind that much of the rebound in earnings has been driven by a combination of deep cost cutting measures and global economic stimulus measures. Hence, economists are becoming increasingly worried that any premature removal of stimulus and tightening of liquidity may jeapordize the global recovery taking root, resulting in additional cost cutting and even higher unemployment. As a result, investor uncertainty is rising, as seen by the large pop in the VIX, and are divesting from risk and heading towards the Dollar.
The EU will be relatively quiet data wise until Thursday's monetary policy decision. The ECB was complaining about the strength of the Dollar recently, and the Euro has since declined about 300 basis points. As a result, the ECB may be less inclined to take any liquidity measures at this week's meeting. Although, we will have to see how the Fed acts on Wednesday first. Therefore, between now and then activity in the EUR/USD will likely focus on U.S. econ data and Q3 earnings reports. Hence, investors should keep an eye on the S&P futures and their interaction with present technicals along with October lows should they be tested.
Technically speaking, last week's sharp movement below the psychological 1.50 level is a discouraging sign for bulls. However, there remain several uptrend lines we can form, meaning the EUR/USD has a few technical cushions to rely upon before investors can safely cry bear. The EUR/USD has three uptrend lines to fall back on along with the psychological 1.45 level should the currency pair take a turn for the worst. Our 2nd tier uptrend line seems to be a key technical since it runs through October lows and likely represents the support separating the EUR/USD from a retracement towards 1.45. As for the topside, the EUR/USD now has multiple uptrend lines bearing down on price and the psychological 1.50 level becomes a technical barrier once again. Overall, although the uptrend remains intact, investors should tread carefully since U.S. equities are facing headwinds.
Present Price: 1.4761
Resistances: 1.4806, 1.4828, 1.4853, 1.4878, 1.4907, 1.4933
Supports: 1.4760, 1.4723, 1.4686, 1.4670, 1.4638, 1.4612
Psychological: 1.50, 1.45