The EUR/USD pair went back and forth during the session on Tuesday as the 1.30 level held up as support. However, this is neither a bullish or bearish candle, and is relatively neutral. The real question then becomes whether or not the market can move decisively in one direction or the other. Without a doubt, the thing that will be pushing this market more than anything else will be the Italian elections and the fallout from them. The markets are essentially in a “holding pattern”, and as a result this pair is going to be difficult to trade. However, if we get a solid break below the 1.30 handle, we believe that this market could trend much lower, perhaps as low as 1.25 before the move is all said and done. Alternately, we have to believe that any rallies from this point on will be selling opportunities and to we can break above the 1.3250 level.
The Euro is going to be the focal point yet again as the Italian election results showing such divisiveness in that country on the idea of austerity puts an exclamation point on the issues underlying the European debt crisis. While the market seemed to believe that the debt crisis was over with, it has come back with a vengeance without a doubt. This is what you get when you have a short-term focused market like we have had over the last five years, complacency. Complacency leads to these erratic moves, and as you can see we have fallen quite a bit over the course of the last two months.
With the price action being what it has been over the last couple of weeks, we think that the market will more than likely continue to be soft for the short term. Going forward, we are looking for resistive candles on rallies in order to start shorting again, but if we do manage to get above the 1.3250 level on a daily close, we would have to reverser bias start looking to buy the Euro again. Because of this, we think this is going to be more or less a short-term traders market.
Written by FX Empire