By: Christopher Lewis
The EUR/USD fell on Wednesday again as the “risk on, risk off” attitudes of the market continue to wax and wane almost daily. The pair is currently struggling to make any real gains, but is also being held aloft by the support area near the 1.30 mark.
The European Union continues to be the focal point of world economic fears, and as a result this pair will continue to behave very erratically going forward. The Non-Farm Payroll report comes out on Friday, and this could have a dulling effect on the trading action for Thursday. The pair has struggled to make any real moves over the last few weeks, and to be honest has been extraordinarily patient with the European leader when it comes to coming up with solutions.
There has been market chatter of Asian central banks buying this pair near the 1.30 mark, and this would make sense as many of them diversified into the Euro over the last few years as an alternative to the US dollar. Some of the most notable suspects would include China, who counts the European Union as its number one customer. If your customer is suddenly losing value in their currency – it makes your profit much smaller on exports. The idea that the Chinese would step in and buy isn’t a real stretch – they have been buying US Treasury notes for years in order to keep America solvent enough to buy Chinese goods.
Technicals of the EUR/USD
The 1.30 level is the beginning of a massive support zone down to the 1.29 level in my opinion. The 1.28 has also shown a bit of supportive action in the past as well. While the trend is most certainly down, and there is a daily downtrend line that held again on Wednesday, the pair will struggle to “collapse”. The move down will more than likely be a grind lower, and this suggests that the safest move is to sell rallies on the shorter time frames. A daily close below 1.29 has many traders selling this pair off in droves. However, it is likely that the Non-Farm Payroll number will have to be out of the way before we see any serious moves.
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