The EUR/USD managed to build a temporary base above 1.40 earlier today, and has proceeded to propel off of our 2nd tier uptrend line after JPMorgan’s 2nd quarter earnings blew away analyst expectations. Volume seems to be picking up, and we could finally view a technical breakout should sufficient buy-side action persist. The EUR/USD has cruised past our 3rd tier downtrend line, a key near-term barrier since it runs through July highs. We’d like to see momentum keep price comfortably above our downtrend lines for the immediate term to avoid the possibility of a retracement. If the EUR/USD can’t stay above our 3rd tier downtrend line we may see a small pullback with the possibility of consolidation.

This rally could have legs since we’ve seen very positive earnings results so far this week. IBM and Google will report later today, and if they surpass analyst expectations this may be enough juice to send the EUR/USD over the top. Meanwhile, 1.40 is fading into the rearview mirror, meaning previous July highs may be taken down next. We’ re out of downtrend line formations for the time being, a positive signal for the near-term. We still need to see how the EUR/USD builds off of today’s momentum. However, with U. S. unemployment claims coming in well below analyst expectations for the second week in a row, there’s more positive than negative news today.

On a cautionary note, CIT isn’t having any breakthroughs with their negotiations for another shot of liquidity, meaning the business lender may file for bankruptcy on Friday. Though some analysts state the failure of CIT wouldn’t pose any systemic risks, it remains to seen what impact a pending bankruptcy could have on the U. S. economy and its currency. However, investors seem to be brushing the CIT news aside, and are focusing on the encouraging earnings reports. It’s interesting how the Euro is exhibiting a relative strength, as seen in the EUR/GBP, since this week’s economic data from the EU underperformed.

When banking on the concept of a global economic recovery, investors may opt to invest in the Euro vs. lower interest rate currencies since the EU hasn’t made as large of a commitment to liquidity. An immediate-term key for the EUR/USD will be taking a leg up from our 3rd tier uptrend line. Meanwhile, keep an eye on the currency pair’s interaction July 1st highs should they be reached. Once again, with the EU’s economic data out of the way for the week, the EUR/USD’s performance should rely heavily upon 2nd quarter earnings reports and U. S. equities. Even though the S&P futures are off slightly pre-market, the EUR/USD’s performance to the upside could be good news for the U. S. markets. 

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