The EUR/USD is registering a sizeable pop following Tuesday’s consolidation.  The upward movement comes sans abnormal volume, and we’ve yet to witness sizable action to the upside, perhaps today?  Investors are likely hesitating after this week’s economic data failed to impress.  Though today’s headline EU CPI met analyst expectations, CPI has turned negative for the first time since the beginning of the crisis. 

Additionally, the EU released disappointing economic sentiment and industrial production numbers yesterday.  Therefore, although the EUR/USD is heading north today in reaction to upbeat earnings from Intel, investors seem reluctant to put all of their chips on the table.  However, the EUR/USD has managed to climb past 1.40 and July 9th highs, our two immediate-term barriers.  We’ve adjusted our trend lines accordingly to give investors an idea of the technical obstacles separating the EUR/USD from a more substantial breakout to the upside.  Our 2nd and 3rd tier downtrend lines appear to be the last line of defense for the near-term since they run through June and July highs, respectfully.  It would likely take a large volume shock to break through our downtrend lines, so investors should pay close attention to today’s buy-side activity.

Meanwhile, gold and the S&P futures have made encouraging movements to the upside, showing the correlations are on the same page.  We’ve witness quite a positive development across the board so far this week.  Now is an important juncture in determining whether the rally tops out and subsides to consolidation, or busts through to the upside with a technical progression.  From our view at the moment, it appears the rally could settle down since the powerful volume required just isn’t there.  However, we will need to see how the rest of the session unfolds for the market can be quite volatile. 

Even if today’s rally should cool off, it would be nice to see the EUR/USD begin to build a new base above the psychological 1.40 level and our 2nd tier uptrend lines.  The EU will be relatively quiet on the data front for the remainder of the week, leaving the show up to U.S. data and earnings.                                

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