EUR/USD Forecast May 11, 2012, Technical Analysis

The EUR/USD pair continued to show weakness on Thursday as the attempts at a rally only seem to have substantiated the 1.30 level as resistance at this point. The level was a spot of massive support a couple of sessions ago, and it now looks as if the markets are going to finally break this pair down.

The candle for the session is a shooting star at the bottom of trading action, and this pair looks as if it is going to pressure the bulls into giving up control again. The breakdown of the triangle a couple of sessions ago is indeed a big deal, and how we could see a fall down to the 1.25 level based upon measurements of that pattern.

The European Union is a long way away form being calmed in general, and the recent elections show that the general populace is very unhappy with what is going on. The austerity measures in various countries are coming under attack, and more of this will more than likely be the norm going forward. With this in mind, it is very likely we will continue to see voters electing anti austerity politicians, and there are even open discussions about the Greeks leaving the EU. (A suggestion that was considered lunacy just a couple of months ago.)

The 1.30 level should continue to be an influence in this pair, and as long as the market can stay underneath that mark, there is a good chance that selling is going to pay going forward. Buying this currency with all of its problems at this point in time takes a real leap in faith, and the ability to ignore a lot of negative headlines. The markets have been doing this for far too long and it now looks like even the most rosy of bulls are starting to admit something is wrong in Europe.

The talk around the markets is that the Chinese have been buying up the Euro, as the area is its largest trading partner. The Chinese simply cannot afford to let the Euro fall too far in value as the US demand for Chinese goods is somewhat flat, and certainly not strong enough to make up the difference.

With all of this being said, the pair can only be sold at this point in our opinion. There are simply far too many shoes to drop out there, and the news will more than likely be negative on the margin. With this in mind, we know that owning the Euro is something we simply won’t be bothered with.

The breaking of the lows from the Wednesday session has us selling as we expect to make a run down to the 1.26 level at first. That was the site of the major swing higher in January, and we think that area will offer support. However, the triangle above measured to 1.25, and we suspect we could get there in relative short order if the right combination of headlines comes out in the future.

EUR/USD Forecast May 11, 2012, Technical Analysis

Written by FX Empire