The EUR/USD pair shot straight up during the Thursday session after the press conference from the ECB Chairman stating that he thought other G 20 nations would it work against the value of their own currency. Obviously, Mr. Draghi has no access to the Internet. Everybody in the currency market knows that the Bank of Japan is about to start working feverishly against the value of the Yen.
He also suggests that none of these countries would break this promise. He is obviously never heard of the Federal Reserve. The Fed just announced weeks ago that they were going to continue to purchase assets. Granted, there was a little bit of a “scare” during the last minutes that the few members that are hawkish on the board were getting a little bit more restless, but in reality the unemployment rate in the United States is nowhere near where it needs to be for the Fed to start tightening monetary supply.
With all that said, the Euro also has bounced off of a nice uptrend line that we mentioned yesterday, as well as the 50 day exponential moving average. It now is threatening the 1.33 level, and with Mr. Draghi’s comments, we are starting to think that the 1.33 level will be broken. At this point time however, it’s difficult to buy this pair until we get some type of pullback was supportive action. Alternately, we could see a scenario of buying above the 1.33 level, but this would have to be predicated upon a daily close up above that area.
In fact, the situation has changed suddenly so much that we are not willing to sell the Euro until we break below this trend line. Going forward, we still expect a lot of a rally behavior, but it looks like the buyers are going to take control in the near-term. We expect a lot of short covering to continue, as well as new buyers stepping into the market every time we pulled back. Again, selling is not going to be possible for us until we break and close below this trend line.
Written by FX Empire