EUR/USD continued to rise on Thursday as traders continue to look at the bright side of all things European, even if the area has severe issues ahead of it for the next several years. The recession that is coming to the European Union seemingly doesn't interest traders, and the pumping of liquidity into the markets is going to create another false bubble in many asset classes, and this market could be one of those.
The breaking of the 1.3250 level opens up the road to 1.35 now, and with the way the candle closed on Thursday, it is possible that we could see that in short order. At 1.35 we could see a significant amount of resistance, and the 50% retrace is actually below that area, at roughly the 1.3420 level. The entire area could provide bulls with headaches.
The pair will continue to be at the mercy of headlines, and as a result will continue to be very volatile. The news flow about Europe continues to be often and both bad and good - resulting in a very confused market going forward. With this in mind, we see that this pair will continue to jump back and forth with each headline until some kind of finality happens. In the mean time, we are only trading it as a shorter term market.
The 1.35 level ahead will cause a certain amount of resistance, and we think that this area will be the opportunity to sell it given the right bearish candle, but no matter if we are going to take the long position based upon the break of the Thursday highs, or the potential weakness at 1.35, we don't dare hold on to a trade more than 48 hours as this market continues to chop up trading accounts.
The break of the Thursday highs would have us taking profit at the 1.3475 mark, and a weak candle at 1.35 has us aiming for a short to the 1.33 level before taking profits. The market hasn't been conducive to longer traders lately, so there is absolutely no reason to fight it.
EUR/USD Forecast February 24, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3