By: Christopher Lewis
The EUR/USD pair rose initially on Thursday as traders around the world celebrated the Federal Reserve’s quest to kill the US dollar in the form of low rates until the end of 2014. However, something odd happened: The sellers showed back up at the top of the resistance range that the market has been contesting with.
The fact that the Euro is having issues rising against a currency that promises low returns in the form of interest for the next two years is telling. Adding to that is the fact that the Euro actually keeps falling against the Swiss franc. Yes, the same Franc that has a “floor” in it at the 1.20 level. We are currently trading about 60 pips above that, and the market doesn’t seem too concerned about that. Of course the Swiss will have to intervene, but the fact that the Euro is so unwanted that people are actually willing to buy Francs with it says more than I ever could about it.
Bottoming Pattern or Continuation?
The action on Thursday to produce a hammer really has to be concerning to the bulls. However, we don’t really have our signal to sell until the bottom of that range is broken. The yellow box on the chart is the same one we have been talking about over the last several session, and as it gave way – this would have certainly brought buyers into the marketplace. Those people are now starting to lose money. Think about that – there is a lot of information in that statement.
As those people begin to understand that they are in a bad situation, they will cover, pushing the price down even more. If this starts happening, there could be a run to the exits in the EUR/USD pair. If we break below the bottom of the Thursday range – I will be there profiting from that move.
The downside will certainly be choppy at times, but the truth is there are simply far too many issues with the Europeans right now to be bothered owning the currency. In fact, people are starting to discuss whether or not the ECB should take losses now……can you imagine?
On the other hand, if we break above that Thursday high – it is a very bullish sign and I will have to follow the market higher. I won’t be holding my breath for that move though, and wouldn’t trust it as much – so it would have to be a daily close in order to actually follow it.
