EUR/USD Clears Monday Highs on Back of Risk Trade

By Fast Brokers – The EUR/USD is trading in the green again today as the risk trade regains some of its positive momentum.  The combination of in line Chinese Manufacturing PMI data and the RBA raising its benchmark rate by another 25 basis points is giving investors confidence that economic performances remain on the path to recovery.  Although the RBA signaled that its latest rate increase places the central bank’s monetary policy in coordination with expected inflation, the RBA’s vote of confidence is enough to refuel the risk trade.  Naturally, the EUR/USD is benefitting from today’s events since the Euro was already flexing a relative strength despite the debt issue in Dubai, which now appears not as severe as previously speculated.  The EU released a bit of data of its own, including a positive Germany Unemployment Change figure along with an expected 9.8% EU Unemployment Rate.  German Retail Sales did print a basis point shy of expectations, although this doesn’t seem to be having too large of an impact on the currency pair at the moment.  Meanwhile, investors should note that gold is knocking at $1200/oz while the S&P consolidates above 1100.  Hence, the EUR/USD’s positive correlations are strengthening and could be preparing for another leg higher should fundamentals and psychologicals work in favor of the risk trade.

Technically speaking, the EUR/USD is creating some space between present price and the psychological 1.50 level.  The currency pair has cleared October highs once again and could take a shot at November highs.  That being said, investors should monitor the EUR/USD’s interaction with our 3rd tier downtrend line and 11/25 highs should they be tested.  A breakout beyond these two technical barriers could yield a more accelerated upward movement.  As for the downside, the EUR/USD has multiple uptrend lines serving as technical cushions along with intraday lows and the psychological 1.50 level.

The EU news wire should be relatively quiet until Thursday’s ECB meeting.  At the ECB’s previous press conference, Trichet seemed to have a more aggressive tone in terms of the central banks intentions to unwind alternative liquidity measures.  Exactly which liquidity tools and when they would be dismantled remains to be seen.  Either way, Thursday’s monetary policy meeting could carry a bit of uncertainty.  For the time being, investors should eye the EUR/USD’s topside technicals along with any developments in the currency pair’s positive correlations.

Present Price: 1.5076

Resistances: 1.5082, 1.5097, 1.5117, 1.5133, 1.5154, 1.5168, 1.5117, 1.5133

Supports: 1.5068, 1.5060, 1.5045, 1.5027, 1.5015, 1.4988, 1.4977

Psychological: 1.50, November Highs

Market Commentary provided by Fast Brokers.

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