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Technical analysis: EUR/USD (25.07.12)

EUR/USD has been trading in a downward channel since the beginning of May, and with the bears in full control it is currently hovering around the March 2010 lows at 1.2117. As Spain is about to request a full bailout, and after Moody’s downgraded the untouchable core of Europe and cut the outlook on the EFSF, the fundamental picture for the single currency remains bleak as the euro continues to lose value against the relative safe haven US dollar.

With the MACD single line below zero since the end of April, and with the RSI about to cross below the 30 level on the daily chart, there seems to be more room for downside movement. The gap from the weekend open also suggests that the pair could be heading much lower, all the way down to January 2005 lows at 1.15.

However, as the pair is approaching the psychologically important area at 1.20 we should expect bounces, which could offer opportunities to sell the euro from higher levels. Such bounces could push the euro all the way up to the resistance area at 1.27, before it falls back again. Considering the situation in Europe and the lack of hints for more QE in the US, an alternative scenario for the pair is hard to imagine.

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Dafni Serdari
Market Analyst

Published: 25 July 2012

You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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