By Fast Brokers – The EUR/USD is logging sizable losses today after BP and U.S. Steel issued disappointing earnings releases. The EUR/USD has dropped beneath our 2nd and 3rd tier downtrend lines on moderate volume. Both commodity-related earnings releases worry investors that production and consumption may not be picking up as much as analysts hoped. The most disconcerting is U.S. Steel’s cautious outlook for Q3, denting projected near-term aggregate demand and consumption. Also weighing on the EUR/USD is a weaker than expected CB consumer confidence number from the U.S. Since the EU has no data on the table today, the EUR/USD is taking its cue from U.S. equities. Therefore, the EUR/USD has little positive immediate-term catalysts to rely on.
Despite today’s weakness, the EUR/USD remains comfortably above 7/23 lows and our 1st and 2nd tier uptrend lines. Additionally, the EUR/USD hasn’t experienced any abnormally high volume on the sell-side so far today. Therefore, the currency pair’s present uptrend is intact. The EUR/USD is finding strength in yesterday’s GfK Consumer Confidence number coming in well above analyst expectations, continuing its upward trend while highlighting a more optimistic European consumer. The consumer confidence number adds onto Friday’s better than expected PMI data points, helping counterbalance the negative pricing and production numbers from earlier last week. The EU also released its M3 money supply on Monday. Though the headline number came in line with analyst expectations, the money supply continues its downward trajectory. This means that the ECB will be less inclined to begin tightening its monetary policy any time in the near future. However, the decline in the M3 money supply could be slowing down, creating the possibility of a new base.
On another encouraging note, the bond spreads between EU countries are narrowing, indicating that uncertainty is abating concerning the near-term stability of the troublesome economies of Ireland and Greece. If the weaker economies of the EU region can continue to stabilize, this could have a positive near to medium-term impact on the Euro. Improvement within the smaller economies of the EU could also indicate that Eastern European economies may begin to notice signs of improvement as well. This would be a key development for the Euro since shortcomings in Eastern Europe have inflicted damage on EU banks exposed via high risk loans. Therefore, the medium-term picture is gradually improving for the EUR/USD.
Regardless of the medium-term picture, the EUR/USD should continue to take its immediate-term cue from U.S. equities. Hence, investors should keep a close eye on the S&P future to monitor their ability to hold together above our 2nd tier uptrend line. Meanwhile, the EUR/USD still has July 23rd lows and our uptrend lines to rely on. As for the upside, the EUR/USD must face our 2nd and 3rd tier downtrend lines along with the lid constructed from 7/21-7/28 highs.
Present Price: 1.4178
Resistances: 1.4183, 1.4197, 1.4215, 1.4234, 1.4250
Supports: 1.4157, 1.4142, 1.4117, 1.4094, 1.4078
Psychological: 1.40
Market Commentary provided by Fast Brokers.
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