Another Monday brings another surprise in American figures, this time for the upside. This triggers risk appetite – the dollar weakens across the board, apart from the Yen. But last week’s fear is far from over – EUR/USD couldn’t climb back. It looks like the pair is back in the range, waiting for developments, and there are plenty of things to move it later in the week.
ISM Manufacturing PMI rose to 53.7 points, and significantly exceeded expectations for a rise from 49.9 to 50.1 points. A rise above 50 points means that purchasing managers are expecting economic expansion. This figure alone is a good reason for celebration.
Pending Home Sales leaped by 6.1%, continuing the sharp rise of 6.4% last month. Expectations were for a small rise of 0.1%. This publication came at the same time as the PMI. Also this was an excellent reason to celebrate, and to put fear aside for a while.
In this crazy market of global crisis, good economic indicators in the US mean hopes for global recovery, which mean appetite for stocks, oil, gold and other currencies. There’s another “risk” currency – the Japanese Yen. The dollar yen correlation worked again, with USD/JPY jumping. This correlation makes the Yen crosses attractive for long positions.
The dollar reacted with a fall across the board. EUR/USD climbed and stopped at the resistance line of 1.4842. These figures weren’t enough to take it above the same line that it fell from last Monday. Last Monday’s CB Consumer Confidence caused panic – panic that sent EUR/USD below this line.
EUR/USD reached 1.4840 and began retreating once again. It now trades at 1.4817. Looking at today’s trade, the pair is bound by this resistance line and1.4683, that was also the bottom last week.
I recommend reading Casey Stubbs’ article that summarizes last week’s trading in EUR/USD. Was the trendline broken?
See the EUR/USD Forecast for more on the Euro’s week.