EUR/USD Sets Its Sights On 1.40

The EUR/USD continues its balancing act from our 2^nd tier uptrend line, and is making a push for the psychological 1.40 level.  Despite the recovery from 5/28 lows, volume is declining with the upward movement, signaling a lack of support to the upside.  The largest volume we’ve seen in the last month was on the sell side.  Therefore, we aren’t convinced that Monday’s bottom will be lasting.  The key barriers to the upside for the near-term are 1.40, our 3^rd tier uptrend line and 1.4035 resistance.

If the EUR/USD can climb past these obstacles, we could see a near-term pop towards 1.41.  However, the downward pressure on the EUR/USD seems to be greater than the near-term upward momentum, meaning we could see further losses from present levels.  To the downside, our 2^nd tier uptrend line and 5/28 lows are the important lines of defense.  If these floors are broken we could see near-term losses accelerate.  Though we maintain our negative outlook on the EUR/USD for the near-term, the medium-term uptrend has an incredible foundation built up over the year.  With all of the economic data coming in signaling a global recovery, it will take a hefty blow to destroy the uptrend in place.

The EUR/GBP is buckling under the pressure of its downtrend, indicating a relative weakness in the Euro.  The weakness results from a disappointing German Industrial Production number this morning.  While the lackluster data point is negative, the development is nothing to be overly concerned about at this time.  The question becomes whether the slowdown in industrial production is just a bump in the road to recovery, or if the data slumps back into its downtrend.  We won’t get a better idea until next month’s release, yet investors should take note nonetheless.  With the EU relatively quiet data-wise this week, the EUR/USD may take its lead from U.S. equities.  Therefore, if we see a breakout in the S&P futures to the upside, the EUR/USD could follow suit due to their positive correlation.  Meanwhile, investors should keep a close eye on volume patters in the EUR/USD to see whether there is more interest to the downside.

Fundamentally, we find resistances of 1.4003, 1.4035, 1.4090, 1.4103, 1.4139, and 1.4185.  To the downside, we see supports of 1.3945, 1.3891, 1.33855, 1.3815, and 1.3766.  The 1.40 area serves as a psychological resistance with 1.35 acting as a psychological cushion.  The EUR/USD is currently exchanging at 1.3986.

Subscribe by RSS Subscribe by Email