By: Christopher Lewis
Europe continues to be the center of the financial universe as this pair moved in a back and forth manner on Wednesday. The most recent trend has been for the Europeans and Asians to sell this pair off, only to see the Americans pick it back up again. Selling the Dollar is almost a religion at times in New York, and it seems that this is where we are at the moment.
The action for the session ended up with a hammer-like candle. Normally, this would be cause for bullishness, but the session today has a unique caveat: the Spanish are bringing 2 and 10 year bonds to market. This is without a doubt the next catalyst for this pair, and the reaction will be important, as we have recently seen support – even in the face of extreme financial concerns in the European Union.
1.30 is still crucial
The 1.30 level remains crucial for this pair. It is perhaps the most obvious support level in the Forex markets right now, with perhaps the exception of the 1.20 level in EUR/CHF. The pair certainly has a remarkable ability to bounce form that level, but it should be noted that the last couple of minor bounces have been a bit less impressive.
The key to the trade going forward will be found in those bond auctions. If we get a good turnout, the EUR/USD will probably rise. However, there are many issues in the EU right now, and this bond auction kicking off well would be a good thing – but isn’t going to solve the entire issue, which quite frankly may not be able to be fixed after all.
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If the Spanish can’t sell their bonds at a decent rate – this pair could fall, and the 1.30 level could finally give way. If it does, we could have a serious move to the downside. Either way, I will be selling in the near future. The question is now whether it will be sub-1.30, or fading a rally on the first signs of weakness as this pair continues to ping around this area.