Let’s zoom closer over the 3-hour time frame of the fiber (EURUSD). Notice that the pair was able to rally after dipping to a low of 1.2154 earlier today. Since then, it has traded strong and has even reached a high of 1.23426. Thanks to the previous support around the 1.2150 area and the oversold condition at that time, the pair was able to avoid another slide. At present, the euro could still move higher against the greenback since the stochastics are from the overbought region. It, however, could bump into some resistance at 1.2435 and at the previous 1.2222 low. The next significant level that it could reach in the event that the pair breaches the two mentioned marks is 1.2600. On the other hand, the fiber could just move sideways before declining once more. In case it does, 1.2150 should give it enough lift in the mean time.
Apparently, today’s euro rally was due to China’s hawkish position on the country’s European investments. In a statement made earlier today, Chinese officials said that the rumors that the country is currently evaluating its holdings in Europe are ‘baseless.’ China holds a significant amount of European assets in reserves. Due to the debt crisis in the euro zone, some people are led to suggest that the world’s second biggest economy is considering to liquidate some of their positions. Today’s statement, though, hints that the country will not sell EURs at least in the near term. In the occasion that China sells a big percentage of their position, it would signify a big loss of confidence in the currency which would consequently devaluate it further. Of course, the country does not want the euro to decline some more because such would also decrease the valuations of their assets.
Today, the US’s first quarter GDP growth is expected to be revised upward from 3.2% to 3.5%. The better than projected retail sales figures during the first 3 months of the year proposes the likelihood of an upgrade in expansion. Note that about 70% of the US’s total output is from domestic consumption which is commonly gauged by the retail sales account. If the preliminary GDP comes in at least as expected, investors could find another reason take some more risk by buying up the anti-dollar currencies like the EUR. A weaker number, on the other hand, could cause the euro and the other non-dollar currencies to weaken.