By: Christopher Lewis

When looking at the EUR/USD pair, it is quite difficult for analysts to come up with a consensus as to where the pair may be heading. While the multinational European currency has enjoyed resurgence in the first three months of this year, that doesn't necessarily mean that it will in the second three months.

The pair from a technical perspective looks like it is currently stuck towards a massive resistance area. The 1.42500 level slammed this currency pair into a bearish mode when last approached in late October of last year. As we test this area, technically this chart has higher lows as we go along which of course is a very bullish pattern. It appears that the downtrend is about to be tested at the 1.45500 level as a trend line from the very top of the market in 2008 connects to another high in November of 2009 coincide with where the 1.42500 level since right now.

Because of this, the answer to the direction of the pair will probably be answered in the very beginning of the second quarter. It should also be noted that there are plenty of reasons on the fundamental side that could be propelling this pair in one direction or another in March and April.

The Portuguese issue has not gone away, and it appears that a bailout is pretty much imminent. This brings up the question of whether or not some of the other struggling economies will feel the need to pay their debts. Think of it this way: If you are running a country like Spain, why would you bother paying your debt when Portugal doesn't have to? This is the kind of situation that Europeans find themselves in as the debt issues and Portugal, Italy, Ireland, Greece, and Spain are still there even if the regulators have chose to ignore them.

Meanwhile at The Fed, the United States is currently printing as many dollars as it can possibly manage. There is a running joke right now in some trading rooms that says the surest way to make a buck these days? Sell ink. As QE2 winds down in June, the question will be whether or not the Federal Reserve chooses to expand to a third act, or whether or not they will exit the easing process. If they do exit, this will be very supportive for the dollar and propel this pair to the downside.

At this point in time the forecast for QE2 almost has to be a purely technical one, as a lot of these questions are not answered at the moment. It appears that one of the best indicators as to which direction we are going is going to be a weekly close above 1.42500, or a strong weekly close below 1.40000 which would make this pair look weak. It should be noted that the peak and trough analysis does suggest that we are going upwards. However, we have major technical levels to break in the process. Keep an eye on that trend line, and you'll know which direction to go.