By: Christopher Lewis
EUR/USD continues to mystify the trading community at large as the pair seemingly is a never ending series of headline based knee jerk reactions. The Euro has a ton of things working against it – except for one thing: price. The pair broke out on Thursday, and it appears that the bulls are starting to take over.
Perhaps it is another round of “hopium”, or maybe it is the fact that traders only know to sell the Dollar if they feel reasonably well about the economy. Either way, the Euro seems to have a never ending lifeline thrown to it and this latest rally is just another example.
The 1.3250 level had been very resistive over the last several sessions, and even after the lackluster reaction to the Greece bailout approval, the market simply didn’t feel like one that was poised to continue higher. It certainly was a bit of a surprise that the Thursday session produced such fireworks. The stops were hit during the US session that allowed the strong surge at the end of the day, which of course makes sense as the US-based traders habitually, will buy Euros and sell Dollars.
1.34, 1.35, and 50%
Now that the 1.3250 level has been cleared, there are a few other things that the bulls will have to contend with. The first spot will be at the 1.34 level, as it is the 50% retracement of the fall from last year. However, if the Euro has proven one thing it is that there is always someone willing to be bullish. With this in mind, the level very well could give way in the end.
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The 1.35 level is also just above, and I think there will be more of a reaction there. However, this will be the “last stand” of sorts for the bears. I think that the area is a great spot to look for weak candlesticks, but in the mean time – we are more than likely going to an attempt to reach that level. I feel that the 1.33 level will now be supportive, and as a result would prefer to be long for the moment. However, this pair is a short-term environment at this point, and wouldn’t hang onto a trade any longer than an initial target.