The EUR/USD pair had a strong showing during the Thursday session as the European bonds auctions continue to do fairly well all things considered. However, there is a massive resistance area coming up, based upon the yellow box on the chart, and the 1.30 zone. The level has been very important in the past, and it is hard to believe that it won't cause some kind of reaction in the future.
With the situation in Europe looking a little better, the Euro rises. However, we have seen this movie before, and know that it won't take much to push this currency pair back down. After all, not much has actually changed over the last few days in this market. It looks more and more like a short covering rally at this point in time.
We have maintained for some time now that the 1.3050-ish level should be massive resistance, and a break over that would indeed show real bullish behavior by the market. The thing about this pair is that it was in a nice channel, but this channel has given way during the Thursday session. Normally this would be a big deal, but with the resistance overhead kills some of that enthusiasm.
The European situation is far from over and the general sentiment out there seems to be one of mistrust, and rightfully so. The market has fallen every time we have seen this kind of movement, and nobody can seriously think that the Euro is going to rise for a significant amount of time. The area just above is very resistive, and the fact that today is Friday will also have a lot of traders not wanting to hold over the weekend, and feel very fortunate to have profits in what otherwise is a dead pair waiting to happen.
As for a signal, we are looking for weakness close to 1.30, and would not hesitate to sell if we get a shooting star or some other bearish candle in this area. Buying can only be done if we manage a daily close above the 1.31 level, which would signal a clearing of the resistance zone.
EUR/USD Forecast January 20, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S1 S2 S3 Pivot R1 R2 R3