EUR/USD Forecast August 20, 2012, Technical Analysis

The EUR/USD pair fell during most of the session on Friday, but did manage to bounce in order to form a hammer. We are currently hugging the uptrend line of a rising wedge, and as such we are seeing supportive action. However, we think that eventually this rising wedge gives way to lower prices and that the lows from the Friday session would signal a good place to start selling if we can get below them.

As for buying this pair, we simply will not do it as there’s far too many headline risks out there currently in the European Union. Also, you have to keep in mind that there are other concerns around the world right now and most of them favor the US dollar in times of concern.

For example, there’s the obvious slowdown in Europe which of course will push money into the United States. However, there is are also the concerns of some type of problem between Israel and Iran, and this would more than likely pump money back into the United States in a bit of a “safe haven” trade. Further compounding the situation is the fact that the Chinese are slowing down a bit and this of course will have people worried about the global economy in general. When the economies around the world slowdown, the US dollar becomes can.

We do admit that the hammer forming right on the uptrend line is intriguing. We also recognize the fact that the 1.23 level looks to be supportive as well. But quite frankly, once you get to the 1.24 level, you are running into a massive resistance area. This area runs all the way up to the 1.27 level, and it seems to be very noisy indeed. The epicenter is 1.25, and for a quick and dirty technical analysis is the acceptable “midpoint” for this resistance band. We find it very difficult to think that the situation in Europe suddenly going get better, and more importantly better enough for the market to chew through the next 350 pips. Because of this, we are simply waiting for signs of weakness to sell.

EUR/USD Forecast August 20, 2012, Technical Analysis

Written by FX Empire