By: Christopher Lewis
The EUR/USD pair bounced a bit on Monday as traders came back in full force for the year. The Non-Farm Payroll report on the first Friday of the month always makes for a low volume affair, and as it was on the 6th of January, many people think that a lot of the traders simply waited until Monday to start trading for the year.
The Dollar as a whole was hit during the session as the trading community decided it was time to put on a bit of risk for the day. The market had originally opened with a small gap down, but this gap was quickly filled and risen above. The move was probably an attempt to continue the selloff on Friday as a whole.
However, during the US session we saw the “risk on” trading really pick up steam, and this is where a lot of the gains were to be found. This pattern of pessimism in Europe and optimism in America has shown up time and time again lately, especially around noon Eastern Standard Time (New York) when the Europeans are going home for the day. European stock markets will sell off, and as soon as the Europeans close up shop for the day, American exchanges tend to rise a bit. This is also expressed in many of the “risk on” currency trades as well.
Looking At the Charts
The candle for the Monday session looks strong, and does suggest that perhaps the move might have a little bit of follow through, however we are in a strong downtrend, and there really isn’t much of a reason to own the Euro at the moment. All headline risks are certainly coming from that side of the Atlantic currently.
The pair however, is currently in a downward channel, and looks set to continue to fall. The bounce came at the bottom of this channel and perhaps it was just that – a bounce to try and reach the top of the channel. With this in mind, I personally prefer a sell order at the top of the channel, which depending on the trajectory of the bounce could line up nicely with the 1.29 area or so.
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Certainly, there is no way to actually buy the Euro at the moment. Any shocks to the system will almost certainly favor the Dollar over the Euro and any sudden move will more than likely be to the downside. In fact, the Euro is falling against many currencies at the moment, not just the Dollar. With this in mind, I continue to sell rallies until we can get a close above the 1.3050 area or so.