Euro-US Dollar (EUR/USD) Analysis

Currencies / Euro Dec 03, 2012 - 03:37 AM GMT

ForexAbode writes: EUR/USD Outlook For This Week:
Euro-US Dollar (EUR/USD) lost some momentum but has been still inching upward. The currency pair has been mainly staying over 5-day EMA. The sharp downward spike on November 29th found support near 22-day EMA (1.2880). The pair went as high as 1.3027 before closing for the week at 1.2985.

On one hand the continuous effort of breaking the 1.3000 psychological barrier is indicating that we should see some more upward gains but on the other hand the decisive break of this psychological resistance has not yet taken place. The outlook for EUR/USD stays mixed right now and will remain so till an evidence of a decisive break comes in by some sustained price action over 1.3000 level. In case this happens then, on the upside, we would expect further gains, first, towards October 22nd's 1.3080/1.3083 resistance level. This level will also bring in the mid-term trend lines channel. In case EUR/USD breaks over this resistance then it should try to retest the 1.3139/1.3172 resistance zone.

However if the psychological resistance near 1.3000 holds and any strong break below the recent 1.2880 takes place then it would not only represent the break of the recent support but also the break of 55-day EMA. Such a break will neutralize the short-term outlook for further upward moves and should bring in further downward consolidation, first towards 1.2740 or more.

The recent upward jump was a classical example of 200-day moving average support. But fundamentally the price action has been the reactions of the continuously changing sentiments in the Euro zone. Any small hope about bailouts brings in an upward jump but overall the situation cannot be termed as healthy or bullish. Considering this our overall outlook is not bullish for EUR/USD and in the longer term perspective we are considering these moves just as bigger market noises.

As we have been mentioning that though the currency pair had broken over the mid-term parallel channel, the recent upward gains have just completed the 38.2% Fibonacci retracement of the downward move during the beginning of May, 2011 and July 24, 2012 and hence we have been considering the earlier upward move (before the current fall) just as a consolidation in the longer perspective. Further evidence is required by a decisive break over 1.3172 and then 1.3495/1.3500 to conclude that the reversal may be on the way.

EUR/USD Trading Strategies:
As mentioned that even though we expect some more gains, we will stay neutral till some sustained price action above 1.3000 does not take place. In case EUR/USD manages that then we will be on buying side to target the mentioned resistance levels. If the resistance continues and the mentioned, immediate, support is broken then we will go back to short-selling.

Considering the price action and the frequently changing sentiments about the development in Euro zone, our positions will be short term. Euro pairs may tend to be very volatile with unexpected moves because of the situation is Euro zone and hence though the stop-loss should not be very tight but should not be very wide either.

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