The EUR/USD pair tried to rally during the session on Tuesday, but you can see that there was plenty of resistance above the 1.30 handle. My suspicion is that a lot of people saw break down below the 1.30 handle as somewhat significant, so when price got above that level again, they simply assumed that the level should be resistance. In fact, it is somewhat of a "self-fulfilling prophecy."
.jpg "EUR/USD Daily Outlook, May 15")
Within this chart, the candle that formed for the Tuesday session is fairly bearish. In fact it almost looks like a shooting star the bottom of a significant drop. This normally means continuation of the move, and as a result I expect that the market will try to break down below the 1.29 handle next. If we can do that, there is a chance of reaching 1.28 with relative ease, but below there I think is when things get very difficult.
We need a catalyst
In order to bring down through the 1.284 level, I think we need some type of catalyst. We need headlines out of Europe to be poor enough to warrant the breakdown. And less that happens, I don't think will be able to break through this area, and a move below the 1.29 level will be a short-term trade because of this. Perhaps some type of banking crisis coming back into play, or more debt crisis drama. But unless we have something like that, it's hard to believe that we will suddenly collapsing price.
Having said all that, the US dollar will continue to be stronger overall, so there is also the possibility of fading rallies as they, and show signs of resistance. This would focus more on the shorter-term charts, using the daily chart as a bit of a guide. I believe that is probably what the trading this summer is going to be like, unless of course we get that headline that we need to cross the wires in order to get this market significantly moving. The US dollar is continuing to gain strength against most currencies, Sibley because the United States is growing, while a lot of other areas either aren't, or are just barely.