By: Christopher Lewis
The EUR/USD pair continues to chop around as the Monday session saw very little settled other than the 1.30 level as being supportive – which we already knew. The Greek situation is dragging on as the Greek officials simply cannot agree to much it seems, and the bondholders still have to go to meetings with the government.
The pair has been in a downtrend, but the eternal “hopium” continues as the currency markets have been extraordinarily patient with the shenanigans going on in Europe. The market has been rocked back and forth from hopeful headlines to bleak ones. The reaction has always been positive when it looked like the Europeans were about to get their collective act together: all risk assets seem to rise on even the slightest hints of an agreement. This shows just how the market wishes things to be, but there has to come a point where the markets will punish Europe for this drama.
The latest news flow suggests that “they really mean it this time”, but if history is any indicator, the agreement is probably something that will have to be forced upon the Greeks and Europeans in general by the market. The reactions to positive and constructive news are getting shorter and shorter, and as such we may be getting nearer to that point where the market exerts its will.
Three Levels
Currently, the chart has three areas that I am interested in, and unfortunately they are fairly close to each other. The supportive action in the 1.30 area certainly has proven itself over the last several sessions as the buyers step in over and over in this neighborhood. The resistance at 1.32 has been just as impressive, and the 1.35 is an obvious resistance area as well.
.jpg "EUR/USD Daily 2/7/12")
With the hammer from the Monday session, it looks like the buyers are going to try to rally the market again, but the risk to reward ratio is horrible at this point in time. The 1.32 area will more than likely provide resistance again, and if it doesn’t – the 1.35 will almost certainly will. A break below the 1.30 level will have to close below 1.29 in order to be “broken”. As you can see, this pair is a mess. I don’t want to own the Euro under any circumstances, and would rather sell it against other currencies such as the Aussie or Kiwi at this point in time.