The EUR/USD is pulling back from intraday highs after EU PMI data disappointed for the most part. While France's PMI data outperformed, Germany's came in surprisingly mixed, resulting in subpar headline EU PMI numbers. The disappointing PMI results are creating a relative weakness in the Euro, dragging down on what was clearly an overbought EUR/GBP. Although the PMI numbers were negatively mixed, all of the data points still registered an improvement from their previous releases. Regardless, the failure to broadly surpass expectations is taking a bit of momentum out of the EUR/USD's sails. Investors will now look for strong German Ifo Business Climate data tomorrow to help counterbalance today's disappointment. In all, the EU's economic fundamentals continue to indicate a solid recovery. However, investors are becoming uncertain in terms of how long the impressive recovery will last until we witness a noticeable dip in data. Additionally, will the future dip in data yield a near-term setback, or a larger pullback resulting in a double dip recession? While these longer-term considerations, they warrant discussion nonetheless. As for the near-term, the EUR/USD's uptrend remains intact as the S&P futures trade well above their own significant technical supports. Strong EU and U.S. data throughout the remainder the week coupled with a productive G20 meeting could help lead the charge forward. Meanwhile, investors should keep an eye on the downturn in the Shanghai Composite and Baltic Dry Indexes. Any further technical deterioration in these indexes could spark a pullback in global equities and drag the EUR/USD lower. For a more detailed analysis, view our S&P futures commentary.

Technically speaking, the EUR/USD has one more tough area of resistance before taking another large leg up. 8/21/08 highs and the 8/12/08-8/13/08 consolidation represent a zone of strong technical resistance, especially since they revolve around the highly psychological 1.50 level. That being said, the EUR/USD may have limited room to the topside for the immediate-term. However, an eclipse of these levels on a boost in volume could ignite another impressive rally in the currency pair. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with weekly lows and the psychological 1.45 level. Therefore, the EUR/USD has several lines of defense to the downside. We maintain our near-term uptrend on the EUR/USD until further notice. However, the medium-term is becoming much more uncertain.

Present Price: 1.4756

Resistances: 1.4780, 1.4798, 1.4822, 1.4841, 1.4864, 1.4895

Supports: 1.4745, 1.4724, 1.4703, 1.4678, 1.4656, 1.4634

Psychological: 1.45, 1.50

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