EUR/USD Daily Outlook Sept. 12, 2012

Wednesday, 12 September 2012 9:49

By: DailyForex.com

The EUR/USD pair had a strong showing on Tuesday as we broke above the 1.28 handle with conviction. Looking at this pair, we can see that the Euro continues to gain because of a possible to several reasons: the Federal Reserve easing on Thursday, and the short covering of the massive anti-Euro trade that has been on for months.

Because we have broken above the 1.28 handle and just as importantly the 61.8% Fibonacci retracement level, I feel that there is very little in this market that's going to stop this pair from any 1.30 or even a little bit above that handle. Of course, there will be a reaction at that level as it is a large round number, and as such I suspect that this pair will stall right around the big figure.

What's so important about 1.3 is that it is the bottom of a massive descending triangle that says down to the lower levels to begin with. In other words, the support that was found at 1.30 should now be strongly resistive, and we also have a lot of headline risks coming out of the European Union in general.

Lots of headline event risk this week

We have a decision by the German high court on whether or not the ESM is constitutional cording to Germanic law, the Dutch are having a federal election, and the Federal Reserve have us it's FMOC meeting on Thursday. All of these events have potential to move this currency pair, but most of the pundits out there believe that the Germans will grant constitutionality, the Dutch won't elect a radical or someone who is essentially anti-Euro, and the Federal Reserve will in fact do some type of quantitative easing or at the very least extend the time period overall.

EURUSD Daily 91212

Looking forward, I think the 1.3 level will be massively resistive as there is quite a bit of noise above it. I think that selling in that general vicinity is a good longer-term play, but I have to admit that there is very little to keep this pair from hitting the 1.30 level. This essentially means that a short-term buy is in the cards, and then after the initial reaction to this week, I believe that we start to focus on all of the problems in Europe again.

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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