By: Christopher Lewis
The EUR/USD has recent broke above the 1.3250 to 1.33 resistance level that kept the pair down most of the year, with the exception of a few short sessions in February. The pair is of course the center of the Forex world, as it is the most traded financial instrument on the planet. The Dollar’s strength is often measured in general against the Euro, and as a result this is the pair that most traders tend to spend the most amount of energy on.
The pair is one that continues to frustrate a lot of traders. On one hand, we have the United States that seems to be doing well, and is growing. On the other hand, we have Europe that is going into a recession, and has a multitude of problems, both known and unknown. The pair should by all accounts be falling in the minds of many of my friends, but it has been stubborn as per usual.
The pair is enjoying a bit of relief, and I believe that a lot of the bullishness is simply a lack of bad news coming out of Europe. However, I cannot help but think that we are only a bad headline or two from seeing this pair fall hard. With this in mind, I am somewhat cautious going long of this pair for any real length of time.
Support….and Resistance.
The 1.3250-ish area looks rather supportive at the moment as it was once resistance and now has produced a nice hammer on Thursday. The candle from Friday showed an effort by the bulls to continue to move higher, and I think this suggests a short-term pop. However, I see that the 1.35 level above should be massive resistance, and there are three parts to my thought process in this pair.
.png "EUR/USD Daily 4/2/12")
If the pair gets above the highs from Friday, I see a long to be had, but only for a move to about 1.3475 or so. If the pair drops below the bottom of the Thursday hammer, I see severe weakness, and would sell, aiming for a move down to the 1.30 area. And if we do see a move higher – I see the 1.35 level as a great place to sell weakness. It isn’t until we see a daily close above 1.35 that I feel comfortable holding the Euro for any length of time.