The Euro, after initially outlining the 1.26 zone as being powerful potential support 2 weeks back the EURUSD rallied powerfully, spurred on by good stories from Greece and signs the Euro zone were making active steps in avoiding disaster with another financial emergency. Whether the proposed measures will be successful for Greece in the long term still has to be seen, but for the short term forex markets traders appear to be happy.
While writing this the domino effect does look to continue, as no earlier is Greece being managed do the sights turn towards Portugal again. Portugal understandably needs to raise finance thru its Bond sales, unfortunately bond traders are very twitchy regarding Portugal’s capacity to pay back financiers and I personally am unsure that financiers will need to risk taking a loss as in the Greek situation.
How this could affect the EURUSD and the timings is yet to be seen but will be interesting to determine if the EURUSD reacts at the areas outlined below.
The EURUSD, after its swift ascent from this level for 2 weeks straight basically took a pause at the weekly 38.2 Fib level at 1.3240 a little shy of the fifty percent Fib retracement level that I was talking about last week. With the first reaction off that level the EURUSD came down to a 38.2 Fib of the last 2 weeks up move.
Again the Euro has found support and is, at the time of writing, moving back up to check the 38.2 area once more. If this holds we may be heading back down to retest support at the 1.26 area. If it doesn’t hold then the Euro Dollar should continue to what I consider as the main resistance area up at the 1.34 area. Being a dynamic average the weekly 20 simple moving average has come down a bit by around 50 pips and could actually play at providing powerful resistance before finally hitting the 1.34 zone.
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