EUR/USD Forecast May 1, 2012, Technical Analysis

The EUR/USD pair continued to confound traders on Monday, while not only going back and forth, but also giving everyone a little bit of what they want. Simply put, the market isn’t willing to take too many chances at this point, and with the Non-Farm Payroll numbers coming out at the end of the week, there is a chance that the market could be fairly quiet.

The Spanish economy is now in recession, although this shouldn’t be a surprise on any front. Italian bond yields are rising, and the problems in the European Union continue. The US economy was considered to be a bit stronger, but recent numbers have been weak. The employment picture in the US is now front and center as a result of the Federal Reserve Chairman suggesting that further measures to ease could be done if the economy warranted it.

The ability of the Fed to ease even further would certainly weigh upon the US dollar going forward, and it is this reason that the pair seems to be holding its own lately. However, from a technical outlook, there is an obvious descending trend line just above, suggesting that the pair will have a hard time rising as well.

The downtrend line also can be interpreted as a potential top of a descending triangle, so as long as the pair remains within the boundaries, we are more comfortable on the short side of this trade than long. The pair will more than likely be heavily influenced this week as the European Central Bank meets as well as the Non-Farm Payroll comes out.

As for trading it, the selling of this pair is by far the more comfortable route, and it is through this prism that we look at the pair. The 200 day exponential moving average is just above, so longer term traders could be looking to sell at these levels as well. Also, the above mentioned trend line should continue to press the buyers down. On a break of the bottom of the doji for Monday, we would be selling this pair as the headlines certainly favor bad news at this time.

Written by FX Empire