The EUR/USD pair essentially fell off of a cliff on Wednesday as the Federal Reserve Chairman rocked the markets by not suggesting any form of quantitative easing during his congressional question and answer session. The lack of extra sugar for the markets had many traders running back into the Dollar, and this course was seen in this pair as well.
The convergence of the technicals in this area also would have given a lot of credence to the fall. The 1.35 level was just above, and of course it is an area that holds some weight as the level is a large round psychological number. The fact that the area was just above the 50% Fibonacci retrace level certainly wouldn't have been lost on traders, nor would the fact that the 200 day EMA was there either. If there was ever a day to find the Euro weak, this would have been it.
The European Central Bank also made no mention on another LTRO after the window closed on Wednesday, and the number came in line. It wasn't so bad as far as the amount of banks, and currency involved, but it appears that the markets were hoping for another LTRO for the banks in Europe. It appears that the central banks are getting closer to the idea of making the economy stand on its own.
With all of this in mind, the pair fell straight to the first vestiges of support and stopped. Whether or not we can go lower is another question altogether, but t5he technical analysis is looking very bearish at this point. Candles like this hardly happen as one offs, so we believe that the move could continue. Because of this, we are sellers of rallies, and would also sell a break of the lows for the Wednesday session. The 1.35 would have to be overcome on a daily close in order to have us buying now. The sell side will more than likely have some bumps along the way, but there real support will be found at 1.3250 and 1.30 respectively.
EUR/USD Forecast March 1, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3