EUR/USD Daily Commentary

The EUR/USD is recovering some of yesterday’s losses incurred from the selloff in U.S. equities. The currency pair is re-approaching our 1st tier uptrend line after Germany’s unemployment change number came in much better than expected. The fact unemployment change has exited the 40k-60k range is very encouraging for the EU and creates a sense of normalcy in the employment market. Today’s release tags onto the positive current account data we saw yesterday, and the PMI and economic sentiment numbers from last week. Therefore, economic data continues its upward trend for the most part, encouraging investors the global economy is stabilizing. Recent economic data highlights our belief that the EUR/USD’s present pullback as a result of overbought conditions combined with a hesitation at the psychological 1.40 level. Therefore, the EUR/USD could experience a solid rally today if America’s durable goods orders and new home sales numbers exceed expectations.

The EUR/USD remains in a bullish trend with the next natural obstacles being previous May highs and 1.40. If the currency pair can climb past these obstacles, we could see a solid near-term pop towards the 1.43 area. However, the EUR/USD has its work cut out for it as our trend lines crawl towards their inflection point, which will likely be reached before week’s end. Therefore, we anticipate further consolidation until our trend lines collide followed by a strong directional move. Despite our bullish outlook, yesterday’s solid volume on a down-bar is a disconcerting, and makes us a little wary. Additionally, the inconsistent performance of the S&P has cast a shadow of a doubt on present equity valuations. Therefore, if U.S. equities should falter, the EUR/USD would likely exercise its positive correlation and follow suit. If the EUR/USD should continue its decline, May 21 lows serve as an important support area. Regardless of the near-term uncertainty, we maintain our bullish outlook trend wise until further notice.

Fundamentally, we find resistances of 1.3899, 1.3922, 1.3958, 1.3991, and 1.4024. To the downside, we see supports of 1.3847, 1.3807, 1.3756, 1.3732, and 1.3659. The 1.35 area serves as a psychological cushion with 1.40 acting as a psychological barrier. The EUR/USD is currently exchanging at 1.3889.

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