EUR/USD Bounces Back Above 1.40

The EUR/USD’s upswing on Friday fell short of 6/24 highs as we anticipated since volume wasn’t strong enough to create a more significant movement to the upside.  The currency pair is propelling from our 2^nd tier uptrend line on Monday after the EU reported a better than expected consumer sentiment and economic confidence numbers.  However, despite the improvement, the -31 consumer sentiment number is still a far cry from 2005 lows of -15.  Additionally, the economic confidence number is quite a ways from 2007 highs.  Therefore, we don’t believe the sentiment data should have too large of an impact on the Euro today.

Meanwhile, the EUR/USD is recovering above the psychological 1.40 level, an encouraging technical development.  June 24 highs remain the main barrier in regards to a near-term pop, but our 3^rd tier downtrend line is approaching.  Therefore, any near-term breakout may not have too much room to run.  Despite recent improvement in the EUR/USD since 6/15 lows, the currency pair is still stuck under the lid of its trading range and our 3^rd tier downtrend line.  Investors remain skeptical in regards to the sustainability of a global economic recovery after central banks issued wary forecasts.  Furthermore, investors are taking note of the $615 billion window of liquidity the ECB is providing for EU banks at a 1% interest rate.  Encouragingly, the EUR/USD has reliable supports to the downside, beginning with 1.40 and our uptrend lines.  Hence, it seems the EUR/USD will be mired in its present trading range until there is a technical breakout in either direction backed by substantial news and volume.  However, it only seems like a matter of time, something’s gotta give.

The EUR/USD’s jolt from relative tranquility may come later this week with key unemployment, housing, and manufacturing data coming from both the U.S. and Britain followed by the ECB’s monetary policy decision on Thursday.  The ECB is expected to keep its minimum bid rate unchanged at 1%, yet investors will be interested in how the central bank addresses its present alternative liquidity measures.  As for the immediate-term we don’t anticipate any trend-setting movements from the EUR/USD until the data and central bank meetings roll around.

Present Price: 1.4071

Resistances: 1.4097, 1.4141, 1.4167, 1.4191, 1.4229

Supports: 1.4061, 1.4024, 1.3978, 1.3928, 1.3894

Psychological: 1.45, 1.40

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