EUR/USD moves higher after Trichet comments

The EUR/USD has rallied post the Trichet comments. The only explanation is that he probably started to "get it" that inflation will not be a problem. That the economy is at risk and that sharp disinflation (if not deflation) might be a problem. And in a perverse way that is good for the EURO.

Having said that, the gains in the EUR/USD took the pair back up to the 1.3241 level which is coincidentally, or not coincidentally the 61.8% retracement level of the move up from the October low to the December high. This level has the markets attention and since then, the price has come back down. The pair and trading seems to be trying to figure out which way is best. We know the 1..3242 level on the topside. The bottom is defined by the low yesterday at 1.3093 and perhaps the low from Tuesday at 1.3139.

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Forex Trading EUR/USD Continues Lower

Following a light volume NY session due to the national holiday, the EUR/USD continued lower with a full retracement of the October lows in sight. Downgrades to Spain’s and Greece’s debt ratings the last few days continues to point to the fact that the worst of the troubles in the European Union’s economy are still ahead of them and further easing will be necessary. Looking at our old EUR/USD 4-hour chart, the 1.23 target is ahead of us with little support in sight, whereas resistance to the upside looks plentiful. We will continue to track developments on the pair.

Forex Trading EURUSD also remains pressured

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Forex Trading EURUSD also remains pressured

The EURUSD is also being pressured once again today The pair is moving back in the range that prevailed during the end of October to Dec 11 time period. A ceiling now (resistance ) will be the 1.3080 level (see chart below). The low target price would be the October 27th 2008 low of 1.2334. Other support comes in at the 1.2856 level and the 1.2549 level although support is not all that strong honestly.

The bias is certaintly down. The pressure on some member states like Portungal, Ireland, Greece and Spain has investors nervous about the Eurozone. Despite the rebound in the ZEW survey today, the sentiment for the pair remains weak.

Forex Trading EURUSD also remains pressured

So where would the technicals turn around? The 1.3025 level was the low last week. A break above this will be give some positve encouragement. The 1.3080 level was the high in November 2008 (see chart above). However, a break of the 100 hour moving average will really be needed to shift the bias up. That level currently comes in at the 1.3173 level. With prices well below these levels, there always can be a correction - especially with the improvement in the ZEW surveys this morning. So be alert for a change in momemtum (or a slowing of the downside pressure), but the change in the bias has a ways to go before it turns up again.