EUR/USD Daily Outlook Feb. 29, 2012

By: Christopher Lewis

The EUR/USD has been in a generally positive mood over the last several sessions, and the announcement of the LTRO results today could be the defining moment for the next move in either direction. However, this pair seems to just react to whatever it randomly chooses to sometimes, so the reaction will be best viewed from afar. The close at the end of the session will more than likely be more important than the initial reaction.

The EUR/USD pair has been trying to break above the 1.35 level, and the pair seems to be somewhat unaware that there is a crisis in Europe. The ISDA has said they will hold a meeting on Thursday in order to determine whether or not the Greeks have technically defaulted, something that could absolutely set the CDO markets on fire if they have. This could be a big deal if it isn’t handled correctly, but as we have seen lately, there is always a way to engineer the results you need.

The 50%, 1.35, and 200 day EMA

The area that the pair finds itself in at the moment is one where we could see significant resistance. The round number of 1.35 is just above, and this should produce some kind of resistance as the market likes to go from one large number to the next. This area should be no different, and the market may be a little ahead of itself at the moment which could prompt a pullback.

The area is also the site of the 50% Fibonacci retracement level, and this is one of the favored places for traders to enter the marketplace. The area lines up between 1.34 and 1.35, and this could continue to offer plenty of resistance as well. Add to that the fact that the 200 day EMA is sitting just above price at the moment, and you have plenty of reasons for this pair to fall. However, the reaction and daily close will have to be seen after the LTRO announcement, and possibly even the ISDA findings as well. This pair looks very likely to be choppy going forward, even though it looks a bit vulnerable at the moment. If we close above 1.35 on the daily chart, I would be long. If we close below the Monday lows, I would be a seller. Either way, I won’t take a trade until after the session calms down.