EUR/USD is under 1.30 once again, after bouncing at the resistance line, suffering from weak economic data, and with Spain causing worries once again. It now approaches the lower border of the steep uptrend channel. Here’s an update.
I’ve discussed the EUR/USD uptrend channel in the article on Tuesday about Euro/Dollar at resistance. I wrote there that an upwards move could be seen on Thursday, when the only figure released comes from Germany – the locomotive of the Euro-zone. This indeed happened:
German unemployment change surprised with a drop of 20,000 people, slightly better than expected. EUR/USD went higher and peaked at 1.3107, extremely close to the 1.3114 line. This important line held the Euro before it collapsed in May, and also capped the pair when it attempted resistance.
Moody’s: Spain could lose AAA rating
After trading in the vicinity of 1.31 and failing to break, this morning’s bad figures sent the pair down. A disappointment came from Germany – retail sales fell by 0.9%, when an unchanged number was expected. The result was blamed on last month’s strong growth, but it doesn’t really matter – the strongest country in the Euro-zone isn’t perfect.
Then came the figures for the whole Euro-zone: inflation, as reflected in the CPI Flash Estimate rose by an annual rate of 1.7%, short of 1.8% that was predicted – Trichet won’t be in a hurry to raise the rates next week. The second figure didn’t surprise anybody, but is still bad – the unemployment rate in the Euro-zone stands on 10% – still very high.
The really bad news came from Moody’s – the famous credit rating agency warned that Spain may lose its AAA rating. Spain is the fourth largest economy in the Euro-zone.
In mid June, there was fear that Spain would suffer a credit freeze that would hurt the whole Euro-zone. After 6 weeks of successful bond auctions, a world cup victory and quiet on the economic front, Spain hurts the Euro once again. The result – Euro falls.
EUR/USD Falls and Approaches Uptrend Support
EUR/USD fell below the psychological level of 1.30 and currently trades at 1.2983 – over 100 pips drop. The next support line is at 1.2880, which was a support line about a year ago. Further support lines can be seen in the Euro dollar forecast.
But let’s look at the uptrend channel. EUR/USD is now approaching the bottom line of this channel – the uptrend support. The current level of this uptrend is 1.2966, quite close to the current price.
The pair is supported by this line, and the fall stopped at the moment. Nevertheless, this uptrend support is getting closer, and the pair will need to rise quickly in order to escape it and remain in the uptrend channel.
The Euro’s recent ride came on the back of US weakness. We’ll probably see more weakness in the upcoming release of the US Advance GDP for Q2. Still, we got reminder about the situation in Europe – and it isn’t far better.
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