The EUR/USD is making a solid move higher past 8/13-8/14 highs after the wave of PMI data came in above analyst expectations. In fact, a couple PMI data points are registering expansion (50+) while the rest are making a strong case to do the same. Such positive improvements in data tend to have a larger impact on the EUR/USD than the GBP/USD since the ECB’s interest rate remains at 1%.

The growth in PMI mirrors the expansion we saw in the EU’s Economic Sentiment data released earlier this week. Hence, the EU is making a good case for returning to GDP growth in H2. The EUR/USD is reacting accordingly, knocking on the door of our readjusted 2nd tier downtrend line. The EUR/USD is now in an advantageous position since our downtrend lines are tight. If the EUR/USD can get above our 4th tier downtrend line, the currency pair may experience exciting movements to the topside since the 4th tier runs through August highs. Hence, a breakdown of our 4th tier downtrend line would likely yield a retest of August 5th highs.

Meanwhile, the S&P futures are staring down their own August highs as investors await Existing Home Sales data. A large increase in this data set could propel the S&P futures to new 2009 highs and add fire to the EUR/USD’s upward momentum due to their positive correlation. However, disappointing Existing Home Sales data could drag the S&P futures back towards 1000 and keep the EUR/USD locked beneath our 4th tier downtrend line for the session. Regardless, momentum is clearly in favor of the upside do to positive developments in EU economic data.

Present Price: 1.4337

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.