Weekly Forex Play July 8, 2012

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The EUR/USD for Week of July 8, 2012

EUR/USD Weekly Close: 1.2284
Daily High/Lows:

Fri Jul 6 1.2400/1.2259
Thu Jul 5 1.2538/1.2363
Wed Jul 4 1.2607/1.2507
Tue Jul 3 1.2626/1.2558

Pivots: S3: 1.2087; S2: 1.2173; S1: 1.2229; P: 1.2314; R1: 1.2370; R2: 1.2456; R3: 1.2511

EUR/USD: The positive reaction to the EU Summit last week was short-lived and this week, the market reasserted its risk aversion stance all week long. US and European equities weakened, commodity markets including gold and oil traded lower, and the dollar pairs strengthened, all signs of decreasing risk appetite. Perhaps the most noticeable move was the overall weakness in the EURO, against the USD, the GBP, the AUD, the CAD and the JPY. (In fact the EUR/AUD reached an all-time low of 1.2010.) The Eurozone’s situation is still of concern as evidenced by Spanish yields moving back over 7%. The week’s trading activity illustrated low investor confidence and a steep decline in risk markets was further seen after Friday’s release of worse than expected employment data. This week is starting on a weak note, as the markets look ahead to the coming week’s news releases which shouldn’t cause any fireworks. On the technical front, the focus of the Weekly Forex Play is the EUR/USD. Last week the EUR/USD held below the key 1.2748 level, reaching a wave (2) corrective high of 1.2693. We noted that the orange (2) was complete at 1.2693 unless price took out the invalidation Point 0 at 1.2748, which it didn’t. We are currently in a downtrend for the orange (3). The minimum wave (3) targets have been met (127.2% at 1.2260) although orange wave (3) doesn’t look complete yet. Look for small retracements and another move down to complete this wave (3). Potential targets include 138.2% at 1.2223 and 161.8% at 1.2142 prior to an orange wave (4) correction up. The eventual target will be a minimum of the previous EUR/USD low at 1.1875 which occurred in June of 2010. Have a great trading week!

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