EUR/USD Rallies, Resulting In Consolidation After Sell-Off

The EUR/USD rallied earlier today (Tuesday), resulting in some consolidation following the large selloff. The strength in the EUR/USD came in reaction to better than expected consumer sentiment data in both Germany and the EU as a whole. However, the rally is losing steam already as the currency pair gives into U.S. equities. Earnings are flooding the U.S. market before the bell, and the results are negative for the most part. Therefore, it seems the positive consumer sentiment numbers won’t be game changing for the EUR/USD.
Investors are more focused on future ECB policy with public discord among its members. Additionally, if U.S. equities lose their footing, investors will likely attach the EUR/USD to the S&P futures since investors believe whatever happens in the U.S. will bleed over into the EU economy due to tight economic coupling. The EUR/USD has already dropped through some key fundamental safety nets. The currency pair is turning its back on the highly psychological 1.30 level, a large victory for the downtrend.
However, as we described in our previous posts, the EUR/USD has some solid supports built up from the condensed trading ranges between February and March. Therefore, even if the near-term selloff should continue, there should be intense battlegrounds from 1.25-1.28. The EUR/USD has found support in our previous 1st tier uptrend line and we created a new 1st tier to show the next uptrend cushion. We maintain our negative stance on the EUR/USD for the time being since the S&P futures look like they have more room to give to the downside. However, the EUR/USD could experience relative strength if U.S. equities proceed to selloff due to the better expected consumer sentiment data.
Fundamentally, we maintain our supports of 1.2919, 1.2876, 1.2833, and 1.2800 with fresh bottom-end of 1.2756. To the topside, our 1.2953 support turns resistance while we hold our resistances of 1.3017, 1.3050, 1.3091, and 1.3126. The 1.30 area still serves as a psychological barrier with 1.25 becoming a key psychological cushion. The EUR/USD is currently exchanging at 1.2927.