EURUSD Weekly Summary: Euro fell on contagion fear, slipped below major trendline support

By IBTimes Staff Reporter | May 08 2010 12:36 AM

The EURUSD had a significant bearish momentum this week. Opened at 1.3329 on Monday, the pair dropped significantly and bottomed at 1.2523 on Friday but closed higher at 1.2730. The negative sentiment for the single currency was triggered by debt contagion fear in the Euro zone. The ECB and IMF efforts to solve the problem so far fail to convince the market. Gold gained significantly and seems ready to test it’s all time high at 1226 as investors seek safety and if this panic doesn’t stop, we will see new all time highs in weeks to come. Other “safe haven” currencies like Dollar and Yen also gained significantly this week which is probably will continue to gain in upcoming week.

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On technical point of view, as you can see on my weekly chart below, price slipped below the major trendline support indicating a potential bearish scenario. If the negative sentiment continue, the 1.2520/00 support area could be tested again. Break below that area should trigger further bearish scenario towards 1.2300 even 1.2000 region in longer term view. On the upside, further recovery could be seen if price able to break above 1.2930 resistance area but in order to do that, there must be a good progress on fundamental aspect in the Euro zone. As traders, whether or not this negative sentiment continue is not our main concern. If it continues, we should react properly and keep short Euro on rallies. If the negative sentiment stopped or paused and we see a potential recovery, then we should also react properly, whether to wait and see further development or even open some long positions.

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