EUR/USD fell hard for the week as the rout on the Euro continues. The debt markets in that region are still distressed, and now that the larger volume of trading has returned, the market continued the downtrend. The Euro will continue to be plagued by the issues based in the debt markets, and the fact that the French notes are starting to sell off isn’t a good sign going forward.
The 1.29 level was broken during this past week, and that was our signal that the pair could go much, much lower. The move has been made, and any doubt about sentiment should be washed away by now. The 1.26 level is in the middle of a big cluster of trades from the summer of 2010, and this will be the next major hurdle for the bears out there. If that gives way – there isn’t much keeping this pair from falling to the 1.19 level.
The continued pressure on the Euro should be anticipated. The Euro is selling off against everything, not just the Dollar. The Aussie is in virtually unknown territory against the Euro, and the Kiwi is getting there. The Canadian dollar has been beating the Euro severely as well. There are signs of Euro weakness everywhere, and one of the biggest signs is the fact that the Euro is below parity with the Yen. (Remember, the Yen is denominated in 100s.)
The play going forward is certainly going to favor selling rallies. The 1.26 level should produce some kind of bounce, albeit short term. The selling of that bounce would be a great set up to fall down to the 1.19 level. The 1.30 should now be a lid on this market, and it would literally take a weekly or at least daily close above that level to have us bullish of this pair again. The weekly candle is closing towards the bottom of the range, and this shows us that the momentum is picking back up to the downside. We are selling rallies on signs of weakness, and would become very interested in selling near the 1.29 or 1.30 levels on weakness.
EUR/USD Forecast for the Week of January 9th, 2012, Technical Analysis
Originally posted here
