By: Christopher Lewis
The EUR/USD pair got a bit of a boost on Thursday as a couple of the Federal Reserve members mentioned that the low interest rates will probably have to continue. Also, there are hints that the European Central Bank will flood the market with money again in order to bailout banks, countries, and who else knows. In other words, the can will be kicked down the road a bit farther.
The pair got a boost from these two factors, and the “risk on” trade continues to push the pair higher. The Chinese economy is said to be perhaps growing at 9%, (whisper numbers) and this should be a good sign for riskier assets in general. The Euro is certainly “risky” these days, and let’s be honest here: The situation isn’t fixed quite yet.
ECB buying bonds?
With the bond markets in a few of the periphery countries starting to spike, there is a real chance that the ECB will come into the markets and start buying bonds in places like Portugal, Italy, and Spain. The markets may get a bit of a reprieve from this action, but this is no long-term solution. In fact, this really comes down to how the market interprets the need to do this. In many ways, this could be a very bearish turn of events as well.
The market continues to be one that we aren’t comfortable buying, even with the bullish candle from Thursday. The 1.3250 to 1.33 level has been resistive in the recent past, and I am interested in selling if there is any sign of weakness in that region. The 200 day exponential moving average is sitting just above the last fall, and this should come into play again fairly soon as well. Because of this, I am perfectly willing to wait it out, and sell the rally once it is extended a bit. The pair has a history of whipping around, so a sudden move higher and a quick fall afterwards is hardly a stretch of the imagination. The 1.35 level needs to be cleared on a daily close for me to change my mind. Europe is far too sick to buy into at the moment.
