EUR/USD Daily Outlook - Nov. 20, 2012

Christopher Lewis

The EUR/USD pair had a slightly positive tone to it on Monday, but failed to “stick the landing” as it were, as the 1.28 level keeps up the resistance. The fact that so many of the world’s stock markets exploded to the upside while this pair didn’t really launch is a bit concerning if you happen to be a buyer or bull in general.

The European Union certainly still has a lot of problems, and to top it all off – the French lost their AAA credit rating by Moody’s at the end of the day. This should continue to put a bit of pressure on the French bond market, and now that we have the ratings agencies out there working against the core of Europe, we could be starting to enter another leg down in sentiment.

The Dow Jones Industrial Average managed to close 200 points higher than it opened on Monday. Normally, this would have the Euro up about 100 pips by the end of the day – if not much more. The fact that it was just marginally higher on such a “risk on” day would be a sign of underlying weakness from what I can tell.

Consolidation

I feel that the market is ready to go sideways for the short-term. The 1.27 level is supportive, and the 1.28 level is resistive. In the short-term, I believe that this tight range will contain the market. With the US having Thanksgiving holiday this week, it is very likely than the Americans won’t be bothered to add to the liquidity, and this could keep the markets quite flat in the end.

EURUSD Daily 112012

Even more interesting to me is the fact the fabled “fear index”, or the VIX is sitting just above the 15 level, which is very, very low. This suggests that traders are quite calm about the selloff and because of this – it would make sense to see traders act comfortably with owning the Euro. However, there seems to be a bit of hesitation at this point, and because of this I believe that we will see a selloff in this pair somewhere just above where we are now.

Christopher Lewis

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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