EUR/USD rose during the Thursday session as traders continued to sell the Dollar overall. However, by the end of the session, all of those gains were given up as the market formed a shooting star at the top of the recent resistance area. The 1.31 level seems to be a bit strong for the bulls at this point. With this in mind, we are thinking that the pair is setting up for a nice short trade now.
The fact that the pop form the Federal Reserve's decision to keep rates ultra-low only lasted about 36 hours should be cause for concern for the bulls in this pair. The economic situation may be a bit worse than people imagined, and many people have to be wondering exactly what the Fed saw in order to do this. A lot of those same people think it was in order to insulate the US form Europe - suggesting that Europe is about to get a whole lot worse.
We are selling a break of the Thursday range in this pair, and would expect a slow grind lower from there, perhaps as low as 1.25 before the move ends. However, a break of the top of the Thursday session would be a massively bullish sign, getting us to buy.
EUR/USD Forecast January 27, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3