The EUR/USD is bouncing higher after falling beneath February lows. We recognize positive price movement across the board, particularly in gold and the Aussie. Such activity is likely due to a combination of oversold conditions and the 25 basis point hike by the RBA. The RBA’s decision to pursue its hawkish monetary policy is a boost for the risk trade with Australia’s economic fundamentals on track. However, uncertainty is still hanging over the EU and UK, meaning 
downward pressures could kick in at any moment should negative debt-associated events occur. The ECB does have a monetary policy decision to make on Thursday. It’s difficult to imagine the ECB exhibiting a tight monetary policy stance considering Greece’s fiscal problems. Additionally, EU Flash CPI printed at 0.9%, a basis point below analyst expectations today. Hence, lagging price growth gives the ECB some breathing room to exert a looser policy stance. Meanwhile, it will be interesting to see whether the EUR/USD can continue to hold its ground and build a base around 1.35. The EU will release Retail Sales data tomorrow. However, attention will likely be centered on the U.S. and UK with UK HPI and Services PMI data along with U.S. Services PMI and ADP Non-Farm Employment Change releases. U.S. employment data could prove to be the real market mover. Although, investors should keep in mind that the ADP number has been known to be unreliable in the past, and more emphasis will likely be placed on the headline figure on Friday. Regardless, activity could pick up with key data releases and monetary policy decisions on the way.
Technically speaking, the EUR/USD faces multiple downtrend lines along with 2/26, 2/23, and 2/17 highs. As for the downside, the EUR/USD has several uptrend lines serving as technical cushions along with intraday lows. Meanwhile, the psychological 1.35 area could continue to have an impact on price movements.
Present Price: 1.3588
Resistances: 1.3599, 1.3634, 1.3654, 1.3676, 1.3694, 1.3721
Supports: 1.3573, 1.3520, 1.3493, 1.3460, 1.3438, 1.3420
Psychological: March Lows, 1.35
(click chart to enlarge)
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