The EUR/USD is trying to balance on our 2nd tier uptrend line after reacting negatively to the collision of our 3rd tier uptrend and 1st tier downtrend line. Meanwhile, the EUR/USD is hanging out just above the bottom of the 7/20-7/28 trading range. On a positive note, volume on the sell-side is declining, meaning the currency pair could attempt to stabilize soon. The Euro is experiencing relative weakness today after the credit ratings of Latvia and Estonia were downgraded, damaging EU organizations financial exposed to the Eastern European countries.

However, the EUR/USD is holding up well considering the S&P futures are under considerable selling pressure this morning. We’re going to monitor the EUR/USD’s behavior today should the S&P’s downturn accelerate. If the Dollar depreciates noticeably and the S&P futures tumble, this would add evidence to the argument that the Greenback’s correlation with U. S. equities is shifting. However, if the EUR/USD flat lines or decline and the S&P futures decline sharply, then we may conclude that the depreciation of the Dollar over the past two sessions indicated a pullback in equities.

Meanwhile, the EUR/USD’s medium-term uptrend still has two uptrend lines and the psychological 1.40 acting in its defense to the downside. As for the upside, the EUR/USD will just build more obstacles the more it declines. The immediate-term hurdles to the upside are intraday highs and our 1st tier downtrend line. A recovery into the meat of the 7/20-7/28 trading range could be a positive develop and allow the EUR/USD to build a new base. However, Friday’s high volume shows immediate-term momentum is still in favor of the downside.

Though investors will be looking for EU Industrial Production to stay positive tomorrow, the focus will be on British employment data and the conclusion of the Fed’s monetary policy meeting. If Bernanke states that the U. S. economy continues to improve and there are no plans to add further liquidity to the system, it will be interesting to see whether this results in a stronger or weaker Dollar. While one may normally expect a weaker Dollar since such an announcement will ideally lift U. S. equities, we could witness the Greenback appreciate across the board should such a decision be made. However, we will have to see how tomorrow’s meeting pans out before we get too far ahead of ourselves.

Present Price: 1.4119

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