The EUR/USD has dropped through our 3rd tier uptrend line after America’s U of M Consumer Sentiment number came in weaker than expected. Today’s pullback in consumer sentiment adds to yesterday’s disappointing retail sales data. The battered American consumer is not making a return as quickly as analysts hoped due to the persistently high level of unemployment. The S&P futures are off nearly -2% and crude is trading lower by over -3.5% in reaction to the news, dragging the EUR/USD lower due to positive correlations.

Meanwhile, the Euro is losing a little bit of its competitive edge from yesterday’s impressive GDP reports after today’s CPI releases both came in one basis point below expectations. The EU’s headline CPI has really taken a beating, showing the ECB may be inclined to injection some more liquidity if prices don’t stabilize soon. Investors should keep an eye on the S&P’s interaction with our 1st tier uptrend line and previous August lows. If these technical cushions don’t hold, the S&P futures could experience a sizable leg down. Such a development would likely pull the EUR/USD lower.

The EUR/USD is presently finding support in our 1st tier downtrend line. The currency pair’s 7/20-7/28 trading range is back in play, meaning these lows should provide solid support should they be tested. The EUR/USD also has our 1st and 2nd tier uptrend lines to fall back on. Hence, the EUR/USD’s medium-term uptrend is intact despite intraday weakness. However, the currency pair continues to build new barriers to the topside, including our 3rd tier uptrend and 2nd tier downtrend lines as well as August 13th highs. On an encouraging note, sell-side volume isn’t at an abnormal level, meaning the EUR/USD’s uptrend shouldn’t be compromised regardless of intraday losses.

Present Price: 1.4242

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.