By: Christopher Lewis
The EUR/USD pair continues to be the focal point of the Forex markets in general. The G-20 told the Europeans that they haven’t done enough to shore up their firewalls for the debt markets and banks in the region, and as a result, the European Union will have to find more money to fix the problem. The Germans specifically were looking for the G20 and IMF (read: United States) to put up more money to help solve the European woes. With this information, the markets got a bit nervous about owning the Euro.
The EFSF’s outlook was downgraded to negative by S&P, and this weighed upon the euphoria that the Euro suddenly found at the end of last week. The pair fell a bit on Monday, and the risk assets around the world all fell in unison for much of the session. The market has been headline driven lately and there is absolutely nothing to suggest this is going to change. Because of this, the pair has been very difficult to trade at times.
50% Fibonacci Level
The pair has turned around from the 50% Fibonacci retracement level from the fall in October of last year. The retracement also comes at the 200 day EMA, and this shows that the pair could be a bit toppy at the moment, and the risk seems to be to the downside for the short-term. The fall shows that the 1.35 level could continue to be resistive, and now the real question will be what does the market do at 1.3250? The pair certainly has a bid in it, but there have been so many negative headlines out of Europe that one has to wonder whether or not this is sustainable going forward.
.png "EUR/USD Daily 2/28/12")
Quite frankly, if we can get below the 1.3250 level, it would show real weakness as what was once resistance couldn’t become support. This will have me feeling much more confident in shorting this pair. The pair has defied all logic, and many of the traders I know are simply not bothered to trade it at the moment because of the erratic behavior. If we close below 1.3250, I will sell. If not, I suspect we are consolidating between 1.3250 and 1.35 for the time being.