The EUR/USD pair had a rough session on Wednesday as the markets continue to punish the Europeans for dawdling when it comes to figuring out the financial health and soundness of the region. Several countries are essentially bankrupt, and the dance around accounting gimmicks is finally starting to get old with the market on the whole. With this in mind, it makes complete sense that the pair would have fallen so much lately.
The 1.25 level was approached during the Wednesday session, but not violated. The triangle from a couple of weeks ago gave us a target of 1.25, and since the market came within 20 pips of that mark, we feel it was close enough to consider the target hit.
The bounce at the end of the day was fairly strong, but this market is still very weak overall. The issues in Europe aren’t anywhere near close to being solved, and this rally will more than likely only end up being another chance to sell this pair as the leaders in Europe are consistent in only one thing: disappointing the markets.
The market is probably oversold, and as a result a bit of follow through could be in the works. The leaders of Europe are meeting in Brussels, and there seems to be an idea that there could be good news after the meeting. The move higher at the end of the days smacks of a short covering rally, and as a result it is likely to fail in the end.
The 1.27 level above looks very resistive, and we think that selling from that level would be a great spot in which to do so. The risks are still to the downside, and as a result we think that selling is still the only way we can trade this pair. Certainly buying isn’t the easiest thing to do, and we like to fade rallies at this point. Unless the word “Eurobonds” is part of the final solution, the Euro will struggle, and we feel it is very unlikely that the Germans are going to be willing to back all of the other countries in the EU going forward.
Written by FX Empire