The EUR/USD pair has bounced yet again from the 1.30 level. It is becoming increasingly obvious that somebody somewhere doesn't want sub-1.30 prices. The latest move was done after the newswires picked up a rumor that the European Central Bank was going to swap out Greek bonds that were coming due with longer dated ones. In other words - bail them out through a back door plan.
The level has seen a miraculous announcement or move almost every time it is approached, so one has to see it as a major level to overcome for the bears. The weekly candle was a hammer, and it looks as if the market wants to buy Euros overall. However, this might be more of a habitual thing than anything else. Certainly, it isn't based upon anything closely resembling fundamentals at this point.
The 1.3250 level has been very resistive, and as such we have seen a fairly tight trading range lately. The weekly charts look calm over the last month or so, but the day to day movements have been very whippy, so trading this pair has been an aggravation to many traders. The levels are fairly straight forward in our eyes, and trading this pair for more than a scalp is going to take a breaking of the aforementioned levels.
On a break above the 1.3250 level, we are willing to buy this pair as it would shoe that it just won't die. The daily candle that closes above that level is what we will use as our signal. A daily close sub-1.30 has us short of this market. A sub-1.29 level close has us aggressively short as it shows the last remnants of support have given way. If we get this signal, it would almost certainly have the pair falling back down to the 1.26 level where a real fight will begin.
There are a lot of analysts out there calling for the pair to reach 1.18, and some are even calling for parity. The biggest problem we see with that isn't the fundamentals, as the Euro is highly overvalued at this point, but the simple fact that it puts up a massive fight as we try to sink lower.
EUR/USD Forecast for the Week of February 20, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3