Investors are favoring the Dollar today after Q3 earnings continued to roll in positively, most notably MSFT and AMZN. Furthermore, U.S. Existing Home Sales blew past estimates while Britain's Prelim GDP printed a shocking -0.4%. Therefore, investors are suddenly favoring the U.S. economy, and are heading towards the Dollar in speculation that the Fed may be able to tighten sooner than anticipated. However, the excitement is a little premature since unemployment remains a thorn in the recovery's side. Regardless, investors are taking today as an opportunity to liquidate some of their long positions and lock in profits. We notice pullbacks not only in the Euro, but the Aussie, Yen, and gold as well. Naturally, the Pound is the biggest loser today and is highlighted by a pop in the EUR/GBP. However, the Euro is holding up relatively well due to the EU's positively mixed PMI data.
France continues to outperform Germany, whose Services PMI came in lighter than anticipated. Though Germany's Ifo Business Climate number also printed a bit weak, the data is altogether encouraging. France's stellar performance helped drive the EU's headline Services and Manufacturing PMIs beyond analyst expectations. The EU's fundamental performance is holding the EUR/USD together despite the large selloff in the Pound. The EU's fundamental strength should carry over into next week since the union's econ releases will be light and scattered. The EU will release Germany's GfK Consumer Climate data on Monday. It's hard to believe this number will print positively considering Germany's econ data has been underperforming lately, and consumption is likely feeling the pinch.
Since the EU will have a quiet calendar, investor attention should remain focused on the U.S. and Britain. The U.S. will continue to roll out Q3 earnings along with important econ data, particularly Advance GDP on Thursday. Meanwhile, the S&P futures are having a lot of trouble breaking through their psychological 1100 level. However, any strong movement above could give a boost of energy to the EUR/USD's uptrend. Therefore, investors should keep an eye on the S&P's interaction with our uptrend lines and 1100. In terms of Britain, today's GDP figure is a shocker and has dented investor optimism concerning the global economic recovery. Therefore, Britain's upcoming econ releases will likely carry added weight. Britain will release its Nationwide HPI and CBI Realized Sales on Tuesday. On the other hand, we have seen the EUR/USD move in a negative correlation against the Cable recently. Hence, underperformance in Britain's economy doesn't necessarily mean the Euro will get dragged down with the Pound should its decline accelerate. As a result, investors should pay equal attention to the AUD/USD and gold since the EUR/USD was moving in tandem with these investment vehicles when it exhibited a negative correlation with the GBP/USD.
Meanwhile, the EUR/USD continues to float around its highly psychological 1.50 level. We've highlighted the significance of 1.50 in our past commentaries, and it seems growing investor uncertainty in other risk currencies is preventing the EUR/USD from creating topside separation. However, the technicals and fundamentals are still working in favor of the Euro, and all the EUR/USD needs is a little boost before taking off towards 1.55. On the other hand, any underperformance in U.S. Q3 earnings or econ data next week could undermine the EUR/USD's uptrend.
Technically speaking, the EUR/USD is right around where we left it yesterday. Our makeshift 3rd tier downtrend line and 1.50 continues to serve as the only foreseeable topside barriers separating the currency pair from accelerated upward movements. As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with 10/22, 10/20, and 10/19 lows.
Present Price: 1.5014
Resistances: 1.5021, 1.5052, 1.5086, 1.5127, 1.5146
Supports: 1.4981, 1.4942, 1.4921, 1.4880, 1.4860, 1.4834