The EUR/USD pair fell during the session on Wednesday, breaking to the 1.30 level. However, we do not close below, and as a result there is still back to hang your hat on if you are bullish of the Euro. At this point, we would have to think that this is just more noisy consolidation, as the pair tries the figure is way out. We believe still that a move below the 1.30 level on a four-hour close were more would be very bearish, and as a result we would become rapidly and aggressively short of this market.
On the other hand, we managed to get back above the highs for the session on both Tuesday and Wednesday; we would have to admit that the market looks fairly healthy at that point, and that the Euro would continue to gain overall. Nonetheless, we think that the route with the least amount of friction will be to the downside, and as a result it does look like the Euro is going to continue to selloff overall. There is a bit of a “safety trade” in the markets right now in general, and as a result it makes sense that the US Dollar would continue to strengthen.
Going forward, we believe this market is more than likely going to go sideways for a while, while it tries the figure out what it wants to follow in pay attention to for the long-term. Quite frankly, we have been ignoring a lot of things in Europe lately, like the fact that the Italians have absolutely no governing coalition. This is a small but very important detail as this means nothing to be done about their austerity package! However, the market does tend to give the Euro a lot of leeway, which is exactly what we’ve seen over the last couple of weeks.
If we managed to break below the 1.30 level, we will not only short it but aim for the 1.28 handle. On the upside, we think that the 1.35 level will offer a bit too much resistance, and as a result we would be out of the market before then.
Written by FX Empire