Analysis of EUR/USD
After a massively bullish session during Friday trading session risk sentiment came back into play, boosting the EURUSD all the way up to 1.2390. On Monday the pair bounced back but managed to regain most of what it lost and it is currently hovering around the resistance level at 1.24. In the absence of any good news regarding the Eurozone debt crisis, it looks like the markets are either pricing in more easing coming from the Fed in September or they are just happy with the ECB stance. This divergence between risk appetite and the fundamental outlook though, that seems to be more based on hopes and speculation, is not likely to last long. The pair is currently at a major resistance area all the way up to 1.27. Unless the pair gets above the top of the resistance, there seems to be no reason to buy the Euro, as it is hard to believe that everything is ok with the European debt problems. With the bearish alignment of the 20 EMA below the 50 EMA still in place since the end of April and with the MACD signal line well below zero on the daily chart, the technical set up seems to be reinforcing the bearish outlook on the pair. Considering the low volumes due to the summer vacations, lower volatility and sideways trading could be the order of the week. Once the market gets back into speed again, we could see the pair gapping straight back down, opening the door for the major support level at 1.2071. Be aware of the 1.2566 level, as it could bring a lot of sellers.
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