EUR/USD Forecast May 31, 2012, Technical Analysis

The EUR/USD pair fell hard on Wednesday as a continuation of the concerns occurred worldwide. The Spanish banks are now front and center, and as such we are now worried about the entire zone on the whole, but are particularly interested in the Greek and Spanish issues at the moment. While the ramifications of a Greek default could be dealt with, a Spanish one would simply be far too big. Because of this, there is a large amount of fear in the markets overall at the moment. Stocks, futures, and certainly Forex markets are all being pushed around by this at the moment.

The recent price action had been horrible as we formed four very bearish candles at the 1.25 support level. The action showed just how much pressure there was on the Euro, and the bottom has seemingly fallen out at this point. The risk off trade is now in full effect, and the Euro is the epicenter of all things worrisome. Because of this, we aren’t even entertaining the thought of a possible bull scenario at this point in time.

The 1.21 level below looks as if it could be some kind of support, and we think that we will eventually see this level hit. There always seems to be a litany of Euro-positive rumors floating around the markets, so bounces could certainly happen. However, any rally in this pair should be an opportunity to buy the Dollar at cheaper prices as it continues to gain against the Euro. Looking at it any differently is simply not being honest with yourself about the situation. The longer the Europeans take to fix their issues – the harder it is going to be to even justify owning the Euro. It should be noted that a quick fix simply isn’t out there.

We like selling rallies as they come, and will certainly sell on breaks of the lows. The daily action in this market is consistently bearish so there is absolutely no reason to try and be a hero and catch this falling knife. The market has been very patient with the Europeans, and it now looks as if the patience has finally given out.

EUR/USD Technical Analysis May 31, 2012, Technical Analysis

Written by FX Empire