The EUR/USD has crumbled beneath July 23rd lows and our 1st and 2nd tier uptrend lines. The EUR/USD’s pullback is picking up momentum after German Prelim CPI came in negative (-0.1%) along with mixed data with a negative tint from the U. S., Britain, and Japan. Meanwhile, gold is dropping like a rock, dragging on the EUR/USD due to their negative correlation.

We also recognize dips in crude and the S&P futures, though the declines aren’t as exaggerated as the EUR/USD’s. The most interesting part of today’s movement is that the GBP/USD and USD/JPY are strengthening. Therefore, it appears the Euro is under relative selling pressure. While it’s too early to claim a divergence of currencies, the EUR/USD’s stark negative correlation with the GBP/USD sticks out like a sore thumb. One need look no further than today’s selloff in the EUR/GBP.

We can’t find what’s driving the Euro lower besides the bombing in Spain, although we wouldn’t expect such a large, negative reaction. On a positive note, sell-side volume hasn’t risen to abnormal levels today. Hence, the currency pair may be able to salvage its uptrend by recovering and closing back above our 1st tier uptrend line.

However, if the EUR/USD can’t get its act together, we could witness a retest of the psychological 1.40 level in the near future. Momentum in the EUR/USD is tipping to the bears’ corner, and the currency pair needs strong gains from the S&P futures to stem the bleeding. Unfortunately, it seems U. S. equities are on a downward trajectory as well. Though the immediate-term outlook for the EUR/USD is sour, the currency pair’s medium-term uptrend still has a few tricks up its sleeves.

There are a few solid uptrend lines we can create, with a last resort running through June and July lows. Hence, bulls shouldn’t get too discouraged by the present setback in the EUR/USD. Investors should keep in mind the 2nd quarter earnings season has fared better than analysts anticipated. Additionally, we continue to see some positive sparks in Euro Zone data. Speaking of which, Germany will follow up today’s CPI release with unemployment change data tomorrow.

A lower than expected unemployment change number could help the EUR/USD settle down and consolidate. On the other hand, a worse than expected data point would likely exacerbate the immediate-term pullback. 

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