EUR/USD’s Outlook: The Uptrend Is Saved, For Now

The EUR/USD is strengthening after yesterday’s (Tuesday) large losses in the wake of a better than expected trade balance number out of Germany coupled with encouraging German factory orders data.  Germany’s trade balance seems to be bottoming out, indicating stabilization in its export industry.  Though Germany’s factory orders data came in below analyst expectations, the number shows a vast improvement from 2009’s previous releases.  Germany and France are the heavy-weights in the EU economically, so signs of improvement in German production is welcoming news for a beleaguered EUR/USD.

The EUR/USD has caught the brunt of the pullback in U.S. equities since Trichet and the ECB offered little certainty concerning future monetary policy shocks.  The positive data is allowing the EUR/USD to rally from oversold conditions as the S&P futures find strength in their key psychological 800 level.  Consequently, the currency pair has managed to stay above March 30 lows and is propelling from our 1^st tier uptrend line.  As a result, the uptrend has been saved, for now.  We could see a nice pop in the EUR/USD as our trend lines collide, signifying the uncertainty prevalent in the marketplace.

However, the currency pair may wait for U.S. equities to commit to an uptrend or crash back into their downtrend before it makes another real directional move.  The heightened volatility we are witnessing stems from the Federal Reserve’s quantitative easing announcement, and we don’t expect the wild ride to slow any time soon.

Fundamentally, we maintain our supports of 1.3223, 1.3192, 1.3162, 1.3126 and 1.3088.  To the topside, we hold our resistances of 1.3271, 1.3323, 1.3351, 1.3375 and 1.3413.  The 1.35 area acts a psychological barrier again with 1.30 serving as a key psychological cushion.  The EUR/USD is currently exchanging at 1.3245.

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