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EUR/USD Daily Outlook May 22, 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.

The EUR/USD pair had a bullish session on Monday as the bounce continued from the Friday short covering rally. The G8 meeting over the weekend produced the usual European reaction to the crisis, which is to simply agree to agree to talk about it later. As a result, the rally on Monday was a bit of a surprise, but probably needed as the market had fallen so hard in such a short time period.

The situation in Europe is about to get hairy to say the least. There is a meeting later this week, and the French are now pressing for Eurobonds, something that Germany will never allow. This is going to get a lot of the Euro bulls in trouble as I suspect there is a bit of speculation that the EU will have to go this route. The Germans can be stubborn on things they truly believe in, and not supporting every else in the Union is one of these things. Quite frankly, I am surprised we aren’t having the discussion of the Germans leaving the Union, not the Greeks.

Bullish, for the moment

The action in this market does in fact look bullish, but I believe this is only a temporary situation as the pair is obviously one that overall should be falling. Granted, there are people that think the Fed is going to ease somehow, but the reality is that they are still a long way from doing this. Simply put, the ECB will find itself in a situation where easing is the only way out of all of this trouble, and because of this, the pair will fall in the long run.

EURUSD Daily 52212

The price action does suggest a move higher in the short-term, but I am looking at the 1.30 level as a massive resistance level that shouldn’t be broken. On signs of weakness, I am a seller in this pair. I also see 1.29 as a possible area of concern for the bulls as well as it is the “bottom” of the previous support zone at 1.30 from two weeks ago.

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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