The EUR/USD is trading lower this morning as the S&P futures consolidate just above 1100. The EU is relatively quiet on the data front right now, making the EUR/USD's present movements more reliant the Dollar's reaction to upcoming economic data. Thus far we received slightly better than expected CPI and RPI data from Britain earlier in the session followed by weak PPI numbers from the U.S. The most disconcerting release was the -0.6% Core PPI reading (minus food and energy). The -0.6% decline is the largest in the Core number since November 2006. The setback in producer prices adds onto the sluggish EMI, Business Inventories, and Core Retail Sales data investors received yesterday. In other words, prices are declining while manufacturing slows and inventories rise, not to mention retail sales minus autos are weak as well. Hence, the Fed just received more evidence which may support its continued loose monetary policy stance. As a result, one would expect the Dollar to decline and the EUR/USD to benefit after such news. However, we will have to wait and see how the rest of today's data pans out.
Meanwhile, the EUR/GBP is experiencing further downward pressure today as investors continue to disfavor the Euro based off of Friday's disappointing GDP numbers. The EU won't have much data this week to improve investor sentiment besides tomorrow's Current Account release. Investors are expecting an account surplus of 0.6 billion Euros. An optimistic Current Account number could help out the Euro since an increase in exports implies a stronger currency. The U.S. will release CPI and Building Permits data on Wednesday as well, meaning the Dollar could be in for further volatility.
Technically speaking, the EUR/USD faces multiple downtrend lines along with the highly psychological 1.50 level and previous November highs. However, and a breach beyond our 3rd tire downtrend line could result in a retest of November and October highs with the possibility of more accelerated immediate-term gains. Unfortunately for bulls, the EUR/USD was negated by our 3rd tier downtrend line and 1.50 yesterday, telling us the 1.50 zone continues to have a psychological impact on the currency pair. As for the downside, the EUR/USD has built up a solid support system considering the rally since November lows. Therefore, the EUR/USD has multiple uptrend lines serving as technical cushions along with 11/12 and 10/27 lows. Meanwhile, investors should keep an eye on the S&P's interaction with its psychological 1100 level because a topside breakout in the S&P could bring the EUR/USD along for the ride due to their positive correlation.
Present Price: 1.4886
Resistances: 1.4905, 1.4919, 1.4941, 1.4967, 1.4992, 1.5018
Supports: 1.4883, 1.4856, 1.4827, 1.4813, 1.4792, 1.4770
Psychological: 1.50, November Highs and Lows