The EUR/USD has taken advantage of its relative strength on Friday stemming from ECB President Trichet's hawkish comments. The currency pair has since jumped back up to its highly psychological 1.50 level after of a wave of Flash PMI data that was altogether positive. Therefore, it seems the recovery in the EU's services and manufacturing industries is continuing at a steady pace. In addition to good news from the EU, U.S. Existing Home Sales just printed 400k hotter than expected(6.10m vs. 5.71m). The S&P futures are reacting positively by pushing previous 2009 highs while crude heads north for a retest of $80/bbl. Meanwhile, the Dollar is experiencing a broad-based weakness and gold has shot up to $1170/oz in reaction to continual dovish statements from Fed board members. The concept of loose monetary policy at the Fed well into 2010 is countering any strength built up over last week's stream of disappointing economic data. As a result, correlative pressures and psychological forces are working in the EUR/USD's favor, allowing the currency pair to climb back towards previous November and October highs.
Technically speaking, the EUR/USD is trading in a favorable position right now since it is within arm's length of previous November highs and our 3rd tier downtrend line. Our 3rd tier downtrend line runs through these November highs, meaning there appears to be only a few topside barriers separating the EUR/USD from the possibility of a new near-term uptrend. However, downward forces are still intact, and we've seen how powerful the psychological 1.50 area can be. Therefore, investors may want to taper their enthusiasm and watch the EUR/USD's interaction with topside barriers closely. As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with 11/23, 11/17, and 11/12 lows. Therefore, there seems to be a solid support system in place for the time being.
The data roll will continue tomorrow with the release of German Ifo Business climate data along with Britain's Inflation Report Hearings. However, the focus of the day will likely be America's Prelim GDP and CB Confidence numbers. A second set of positive data points from the U.S. and EU could help send the EUR/USD beyond previous November highs should psychological forces cooperate.
Present Price: 1.4991
Resistances: 1.4998, 1.5021, 1.5036, 1.5051, 1.5070, 1.5088
Supports: 1.4983, 1.4963, 1.4952, 1.4936, 1.4918, 1.4902, 1.4882, 1.4859
Psychological: 1.50, November Highs and Lows