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EUR/USD Forecast for the Week of December 26, 2011, Technical Analysis

By:
Christopher Lewis
Updated: Jan 1, 2011, 00:00 UTC

EUR/USD had a bit of a reprieve from bearishness over the previous week, but each time it rallied new sellers would jump in. It is becoming obvious that

EUR/USD Forecast for the Week of December 26, 2011, Technical Analysis

EUR/USD had a bit of a reprieve from bearishness over the previous week, but each time it rallied new sellers would jump in. It is becoming obvious that the situation in Europe isn’t going to get any better soon, and the bonds markets are starting to heat up again with higher than sustainable rates in places like Italy and Spain.

The recent action has been tainted by the end of year light volume, and only so much can be read into it. However, the fact that there hasn’t even been a massive short covering rally really speaks volumes about the distrust of the Euro presently, and this should continue to be the way forward as the market simply cannot believe the “solutions” that the leaders in Europe keep suggesting. The European Central Bank is more than likely going to have to print money soon, and the value of the Euro should fall as a result. Further weighing on the viability of the currency is the fact that the area is going to head into recession in 2012, and this will certainly keep growth at low levels for some time as the area is in serious austerity mode in several of the countries.

As a general thought, the currency has held up fairly well against the Dollar all things considered. However, the 1.30 level it sits at presently is massive support, and the fact that it can’t break through could be a sign of the problems facing the Dollar in the long run as much as any real support of the common currency. The solutions all look to be Euro negative, and with this in mind the rallies keep getting faded.

The level just below is going to be key to things going forward as it will show a total breakdown of support and a complete failure of the Euro. A breaking below the support level would be at 1.29 as the area looks to be about 100 pips thick as that handle was the low point previously. If the pair can break below the level on a daily close – we would be massive sellers. We aren’t buying until we get well over the 1.35 level as it would show a change in attitude.

EUR/USD Forecast for the Week of December 26, 2011, Technical Analysis
EUR/USD Forecast for the Week of December 26, 2011, Technical Analysis

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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