EUR/USD Pops Above August Highs After Positive PMI Data

The EUR/USD is making a solid move higher past 8/13-8/14 highs after the wave of PMI data came in above analyst expectations.  In fact, a couple PMI data points are registering expansion (50+) while the rest are making a strong case to do the same.  Such positive improvements in data tend to have a larger impact on the EUR/USD than the GBP/USD since the ECB’s interest rate remains at 1%.  The growth in PMI mirrors the expansion we saw in the EU’s Economic Sentiment data released earlier this week.  Hence, the EU is making a good case for returning to GDP growth in H2.  The EUR/USD is reacting accordingly, knocking on the door of our readjusted 2^nd tier downtrend line.  The EUR/USD is now in an advantageous position since our downtrend lines are tight.  If the EUR/USD can get above our 4^th tier downtrend line, the currency pair may experience exciting movements to the topside since the 4^th tier runs through August highs.  Hence, a breakdown of our 4^th tier downtrend line would likely yield a retest of August 5^th highs.

Meanwhile, the S&P futures are staring down their own August highs as investors await Existing Home Sales data.  A large increase in this data set could propel the S&P futures to new 2009 highs and add fire to the EUR/USD’s upward momentum due to their positive correlation.  However, disappointing Existing Home Sales data could drag the S&P futures back towards 1000 and keep the EUR/USD locked beneath our 4^th tier downtrend line for the session. Regardless, momentum is clearly in favor of the upside do to positive developments in EU economic data.

Present Price: 1.4337

Resistances: 1.4350, 1.4360, 1.4375, 1.4405, 1.4420

Supports: 1.4237, 1.4315, 1.4304, 1.4294, 1.4264

Psychological: 1.40

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