The EUR/USD pair found itself falling again on Wednesday as the sellers stepped into the market full force. The pair continues to suffer from uncertainty in the European Union, and with the European Finance Ministers seemingly getting nowhere this week it's likely that we could see continued pressure over the medium-term.
All that being said, this pair has been a resilient example of traders looking beyond bad news. The area above is a large cluster of resistance, so while I certainly think that a bounce from the trend line would be possible, the lower high would have me concerned. I essentially see the 1.28 level as a massive support area, and if that gives way we could see accelerated selling pressure.
With all the global uncertainty out there, there will always be some demand for the US dollar. As the markets become less and less certain, we should see continued buying of the US dollar as the "safety trade" comes back into play. This can be seen on the US Dollar Index as well, as we look to be forming a base.
500 pips of resistance
While I don't think that it's impossible to get to the 1.35 level, there are quite a few hurdles. Remember, this was the area that formed the massive descending triangle that sent us so low in the first place, and of course there are headlines out there just waiting to jump out and push his pair back down. The reason that I find 1.28 so attractive is a selling entry is that it breaks the trend line, as well as forms a lower low.
The Euro does seem to get a lift every time there is a slight bit of positive news, but in reality the Europeans need a much cheaper currency. There seems to be almost no way out of this mess without some form of quantitative easing. This of course will weigh on the value of the Euro, and as such we will more than likely see a cyclical downturn sometime in the next few months.
* Please note that due to circumstances beyond our control, this analysis was posted with a delay, but we hope that it will still help some traders understand the market.