The EUR/USD is picking itself up after yesterday’s losses, preventing a close on the 4-hour below 3/30 lows.  Strength in the EUR/USD comes despite a higher than expected Unemployment Rate for the EU region.  We notice a tight positive correlation between the EUR/USD and the S&P futures as we’ve seen throughout the economic crisis.  Investors expect a recovery in the EU region to follow stabilization in America’s economy, improving the outlook for German and French manufacturing. 

Hence, the EUR/USD is shrugging off the EU unemployment data and following the S&P futures higher.  The fact the EUR/USD avoided re-entering the February trading range on March 30th and today’s lows are above March 30 lows sets the stage for the continuation of an uptrend rally.  The EUR/USD is trading comfortably above our 1st tier uptrend line. 

The next challenge for the EUR/USD will be March 31 highs and our 2nd tier uptrend line.  However, the true test will be our approaching medium-term downtrend line.  Flying under the G20 radar is the ECB meeting on Thursday.  While analysts are expecting a 50 basis point cut in the benchmark rate, investors will be more interested in the language coming from Claude Trichet regarding future monetary policy and the ECB’s present stance on quantitative easing. 

With all of the news taking place this week, we anticipate the high volatility to continue for at least the next few sessions.  Fundamentally, we find supports of 1.3205, 1.3162, 1.3124, and 1.3088.  To the topside, we see resistances of 1.3253, 1.3291, 1.3334, 1.3366 and 1.3409.  The 1.35 area serves as a psychological barrier with 1.30 acting as a heavily-weighted psychological cushion.  The EUR/USD is currently exchanging at 1.3233.

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