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EUR/USD Daily Outlook May 14, 2012

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

EUR/USD continued to grind lower on Friday as the pair still is the very center of the storm in the Forex world. The concerns are well known by now, but there seems to be a new headline that comes out every 24 or 48 hours that gives more weight to the bearish stance in this pair.

The elections last weekend rattled the markets, although they really shouldn’t have. To think that the Greeks were going to keep voting for austerity was naïve at best and delusional at worst. The 20 to 25% unemployment rate has the Greek people thinking less about their debts to large multinational banks and more about such mundane things as putting food on their tables.

Also, the French elected a president that openly talks about renegotiating the austerity program. This of course doesn’t make the Germans happy, but with the results being for the anti-austerity and bailouts crowd in that country, it’s very unlikely that the current situation is going to continue for long. The weakening of the Euro and flooding of the markets with liquidity seems to be a certainty at this point, in a last ditch effort to save the Euro.

1.29 breaks


The descending triangle continues to be the most obvious bearish signal on this chart to me. The breaking of the 1.30 level was the first indicator that we were indeed going to head lower. The 1.29 level is holding things up, but it should be thought of as the last bit of support before the fall. If the level gives, then we can start talking about the target of 1.26, which was the last major support level from the bounce that this pair enjoyed a few months ago.

EURUSD Daily 51412

The candles from Thursday and Friday are of the shooting star variety, and being at the end of the downfall, they both suggest a failure of the bulls to rally in this market. This to me is an indictment on the strength of those traders, and the clearest sign that we are going to fall. On a break of the bottom of those two candles – essentially a move sub-1.29 – I am adding to my current short position. I don’t even see a case for buying at the moment.

Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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