EUR/USD Daily Outlook Jan. 20, 2012

By: Christopher Lewis

The EUR/USD pair has continued to be the focus of the entire market it seems. Over the last few months, it seems that everything eventually goes back to bond auctions, and because of this all traders has had to suddenly become focused on bond auctions in such places as Greece, Portugal, Spain, and Italy. I would imagine that very few of you had any thoughts about what may or may not be going on in the Italian ten year notes before this previous year for example.

The auctions have been fairly strong all things considered since the start of 2012. However, there are a lot of massive auctions coming up, and this can always lead to issues down the road. Besides, we have seen this movie before; the Europeans seem to be making some traction in solving this debt issue only to have a new bombshell suddenly appear to push the markets back down. So the real question becomes “Is this time any different?” I have my doubts at this point.

The problem with the Euro is that it is a marriage of so many different cultures, languages, and quite frankly, work ethics. The northern European countries are in a totally different league than the southern countries, and I have a hard time believing this is suddenly going to change. Until you can get everyone on the same page as far as responsibilities and drive, the Euro is doomed in the end. Truthfully, I think it is anyway as the union simply makes no sense. Lies and deceptions in various governments that simply cannot support their lifestyles seems to be a “cultural hazard” in some places, and the ones being forced to pay the bills – Germany, the Netherlands, and a handful of others are going to get very bored with this sooner or later. Looking at the Euro, I think the next election cycle in many of the richer nations will be the true test.

Resistance Ahead

The 1.30 level just above is resistive. The yellow box remains from the chart yesterday, and although we broke out of the channel – this area is still very strong in my opinion. The fact that we are looking at a Friday and a significant rise over the course of the week leads me to believe that many traders will be happy to take profits in the meantime. Because of this, I am looking for a shooting star or other such bearish candle to sell. If we see a daily close above the 1.31 level, I would be convinced the bullish tone could continue.