EUR/USD Daily Outlook - August 1, 2013

The EUR/USD pair went back and forth during the session on Wednesday, after the Federal Reserve released its minutes from the last meeting. Essentially, the Federal Reserve "punted" leaving the market relatively confused yet again. That being the case, I feel that this market will more than likely continue to meander around this general vicinity. However, I do see a decent set up coming in the form of the weekly downtrend line which by the way was obeyed by the bullish trader during the session.

That being the case, it is the top of the ascending triangle that could decide the fate of the Euro for the next six months, possibly year. The bottom of the descending triangle is the 1.28 handle, and if that level gets violated, I feel that this market will more than likely hit the 1.22 area sometime in spring of next year. The biggest problem of course is the fact that the Euro seems to have "nine lives", much like a cat as there is always an excuse to buy it by some traders out there.

EUR/USD Daily Chart Aug 1

Pay attention to the Federal Reserve, and more importantly expectations.

Pay attention to what the Federal Reserve says over the next six weeks or so, because the markets are expecting tapering of quantitative easing sometime in the month of September. If that happens, you can expect the US dollar to skyrocket in value, and the Euro to truly pay the price as the European markets, and especially the employment situation on that continent are dire at best. Remember, euro presently has an unemployment rate north of 12%, which is much worse than in the United States. On top of that, the overall economy in Europe isn't really that strong. That being the case, it's very possible that we may enter a longer-term US dollar bull market, and if that's the case the Euro will certainly be punished. Why frankly, I think it should be, but as you know markets can remain illogical much longer than we can remain solvent. On a break above the downtrend line however, I have to relent and give the buy signal for the Euro. A break of the lows for the session, I believe that this market will eventually find its way down to the 1.28 handle.

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.