EUR/USD Climbs After Better Than Expected Unemployment Change

The EUR/USD is knocking on the door of our 3^rd tier uptrend line after Germany’s unemployment change came in lower than analyst expectations.  Despite today’s pop in the currency pair, the movement comes on declining volume, giving us little reason to believe the EUR/USD can push through our 3^rd tier uptrend and downtrend lines today.  Additionally, our optimism is muted by the lower than anticipated M3 money supply along with the EU’s CPI turning negative.  Both of these figures indicate that the ECB should be more concerned about deflation rather than inflation, dashing any hope the central bank will tighten its monetary policy in the near-future.  Therefore, the ECB’s benchmark rate could remain at 1% for quite some time, while we wouldn’t be surprised to see further injections of alternative liquidity to bolster consumer and producer prices.  With today’s EU data out of the way, investors will turn their attention to home prices, PMI, and consumer confidence data coming from the U.S.  If America’s economic data raises a cautionary flag as well, the rally in the EUR/USD will likely stall.

The key barriers to the upside for the EUR/USD remain our 3^rd tier uptrend and downtrend lines along with June 11 highs.  We’ve yet to see large volume to the upside, showing investors aren’t motivated to send the EUR/USD through important technical barriers.  As for the downside, we recognize two worthy uptrend lines along with the psychological 1.40 level serving as defenses.  Therefore, it would take quite a dramatic drop on considerable volume to dislodge these supports.    Meanwhile, the EUR/USD remains wedged within the confines of our 3^rd tier downtrend and 1^st tier uptrend lines.  If the rest of this week’s economic data comes in mixed, we may see the currency pair float within this trading zone until these trend lines reach their inflection point.

Investors should fasten their seatbelts because the newswires are just getting warmed up.  Tomorrow we’ll receive important housing, manufacturing and employment data from the U.S. and Britain.  On Thursday the ECB will outline its newest stance on monetary policy while America releases more important unemployment data.  Due to all of the news we expect volatility to pick up as the week progresses, meaning the EUR/USD’s trading range may be broken sooner than we anticipate.

Present Price: 1.4133

Resistances: 1.4141, 1.4167, 1.4191, 1.4229, 1.4246

Supports: 1.4097, 1.4061, 1.4024, 1.3978, 1.3928

Psychological: 1.45, 1.40

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