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Technical Analysis of EUR/USD

The Euro dropped across the board during Thursday’s session as fears of a Spanish meltdown are picking up again. The spread between Spanish and German is currently right below 19% suggesting that the Spanish bond markets could soon come under heavy pressure. As Europe is attempting to buy time for the financial institutions to shield themselves from a potential meltdown in some of the debt markets, the outlook for the single currency remains bearish. The EUR/USD rose at the beginning of the week, buoyed by comments by Bernanke about continued accommodative policy in the US, however the pair hasn’t been able to gain serious traction after the initial surge and the market action of the past two weeks can be seen as a part of a larger consolidation between the 1.35 and 1.30 levels.
From a technical point of view, the market is currently hovering around 1.3357, the 38.2% Fibonacci level from August’s high to January’s low. The bulls seem to have run out of steam as the 1.3357 resistance level has proven to be strong. The negative trendline capping RSI and the MACD signal line, that has been firmly below zero, since October on the weekly chart instill a bearish long term outlook on the EUR/USD market. As the MACD signal line is poised to flip below zero and the RSI is pointing downward on the 4 hour chart, short selling in the market with targets by 1.3268 and 1.3164 are favourable. In the alternative scenario, a break above 1.3357 could open the door for further uptrend movement towards the 1.3400 area.
Weekly chart

4 Hour chart

Dafni Serdari
Market Analyst
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