By: Christopher Lewis
The EUR/USD pair had a quiet day as traders started to come back from holiday on Monday. The pair continues to tread water between the 1.29 and 1.30 levels, and looks set to experience further weakness going forward. The area is of particular interest to many traders as it represents a “line in the sand” going forward for the bulls.
The 20 day and 50 day moving averages are spread out nicely and in a downward slope, keeping trend traders interested in selling. The support in the area has been tough to crack though, and as a result the action could be a bit choppy going forward. While the downside should continue to be the stronger of the two options going forward, it is highly unlikely that it will be easy as the Thursday hammer from last week suggests.
A daily close below the 1.29 level is what is needed for the selling pressure to accelerate, and the lack of volume over the last several sessions could be part of what is holding this pair up. The Thursday candle mentioned above actually broke below the 1.29 level, but on light volume simply didn’t have enough weight to sell this pair off, much to the chagrin of the bears.
.jpg "EUR/USD Daily 1/3/12")
EUR/USD Looking Forward- and Back
Going forward, the Non-Farm Payrolls report this Friday could be very important for this pair as a good number could simply reinforce the widening divide between the United States and Europe, which is heading into recession and more than likely going to see another rate cut this month. With this in mind, buying the Euro would be very difficult and unwise in my opinion. The rallies that could appear form this level would more than likely continue to be selling opportunities as the headline risks are certainly to the negative side for Europe as a whole.
Over the last several months, we have seen the Europeans come up with one scheme after another, all of which provided bounces in this pair. All of those were consequentially sold off as well. I expect more of that going into 2012. I am selling bounces and a daily close below 1.29 has me looking for 1.25 going forward.