By Russell Glaser
The euro has been fairly resilient in the face of significant negative news events surrounding the failure to reach a bailout agreement for Portugal and the subsequent ratings downgraded. The pullback in the value of the EUR/USD is only natural but the lack of a major decline shows a strong trend. As such, traders may find a short term trade setup with a rebound in momentum.
Last week’s failure to take out the 1.4280 resistance does not bode well for the EUR/USD in the short term. Significant resistance now lies at 1.4250 off of the falling trend from the 2008 and 2009 highs. A move above this resistance would spur further buying to the 1.4580 level.
Last week the pair reached a high of 1.4247 before falling to a low of 1.4020 during today’s Japanese session. However, the declines were limited to roughly two cents The market’s muted reaction to the negative news should be taken as a positive for the euro.
Traders may look to enter long on the pair following an exhaustion of the correction. One signal may be a rebound in the Momentum (7) indicator rising above the 100 level.
The weekly chart shows the stochastics are in an overbought state which may signal a further decline in the pair. A move below 1.4020, a level that coincides with the 20-day moving average could send the pair lower to the trend line that rises off of the January 2010 lows. A sharp decline could take the pair to its next support level at 1.3860 where a breadth of stop loss orders may be found.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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