By FX Empire.com
EUR/USD continued to be the focus of the markets this past week as the Greeks simply cannot come up with the deal they need to avert the debt crisis that looms in March. The markets will rally every time there is a whisper of a deal in the rumor mills, but continues to get disappointed. Ironically, this last time we heard a deal was reached, the reaction was muted. It looks like the market is finally starting to get bored with the games coming out of Athens.
The recent action has been pretty impressive, but has been predicated upon the market trying to “get in front of a deal” in the debt crisis. The market certainly will have been a bit overbought considering that it appears that even a few weeks later – we are still not getting a significant deal from the Greeks and the Troika. In fact, it looks like a default is almost an inevitability given the reaction of the Greek people as a whole. Also, there have suddenly been a few remarks about the possibility of Portugal having a restructured deal as well. It appears that the cracks are starting to spread a bit.
The 1.3250 area is the 38.2% Fibonacci retracement level from the most recent downtrend, and as a result we saw sellers step into the market at this level. The pair has an obvious support level at 1.30, which is also the 23.6% retracement level. The breaking below of the level would not only signal a breakdown of the shooting star that we formed for the week, but also a break of a major psychological number as well. Because of this, we are willing to sell a breakdown right away as it should show continued bearish pressure and momentum.
A break of the 1.35 level now seems to be what it would take for us to go long on the weekly charts, and as a result we are basically thinking of sell only at this point. The pair looks set to continue the fall, and a lack of a deal over the weekend could get this move started.
EUR/USD Forecast for the Week of February 13, 2012, Technical Analysis
Originally posted here
