After a back and forth session on Tuesday, one thing can be said: The EUR/USD pair has been one that has caused quite a few headaches for many traders lately. After all, the European debt situation isn’t getting any better and the world knows it. The European banks are without a doubt in serious trouble, and as a result the European Central Bank is helping to keep them afloat, and there is a serious debate as to whether or not they would even be in business without the help of the central banks.
The Portuguese, Greeks, Spanish, Italians, and Irish are all paying high interest rates on their bonds these days, and as a result many are left confused as to why the Euro has held up. The market has been one that selling works in, but you have to be patient and wait for the rallies. Odd really, as it seems that there is always someone willing to try and push the pair higher, no matter what happens.
The 1.30 level is a massive support zone at this point, and the entire world seems to know this now. There are plenty of traders out there that are willing to buy blindly at this level as it seems to be an area that large orders come into the markets. The level is one that will certainly define where the market will go in the near term if it either holds or breaks down.
The level is an obvious one to pay attention to as so many people are aware of it – making it a self-fulfilling prophecy. Because of this, if we get a daily close below that level – we would sell immediately, and with vigor as it would be a major change of events that signals a new leg down in this pair.
Looking at the chart itself, we can see that it is possible we are working on a complex head and shoulders in this market, with the 1.30 level as being the neckline. The selling of rallies is also a possibility, and we continue to see the bullish moves fade. The Tuesday session in fact, was a massive doji – signaling that while the rest of the world was willing to buy risk assets – the Euro wasn’t one of them.
Written by FX Empire