By: Christopher Lewis
The EUR/USD pair has been stubbornly grinding its way north over the last several weeks, confounding the bears as the European Union truly does have many issues that need to be addressed. While nobody in their right mind would suggest that the debt situation in the United States is good, the reality is that a majority of it is owed to the Federal Reserve, and therefore can always be rolled over. The EU on the other hand…
The bulls in this pair got a sudden surprise on Tuesday though, as the Federal Reserve released minutes from the last meeting that made no real mention of the need for further quantitative easing, something that the market was evidentially banking on based upon the reaction. The fall was swift and immediate after the release, and now the complexion of the pair changes.
Bearish look
The fall was severe enough to close at the lows for the session, and the 1.32 level is now under threat to be broken to the downside. The level that I have been watching of ages is the 1.3250 area, and the fact that it is giving way looks very bearish to me. A break below the 1.32 level certainly will invite selling by many of the market participants, and at that time I am willing to be short of this pair for a move down to the 1.30 area.
1.30 looks very supportive, so whether or not we break below it will be interesting. Adding to the potential of a move is the conference by the ECB today. Any hints of a slowdown in the EU should only compound the fall in this pair. The US continues to surprise in general with the economic releases, and the EU looks to be in trouble for years. One simply has to think that the EU is living on a bit of borrowed time. If the 1.30 level gives way, the pair could very easily find itself at the 1.36 handle again. In this environment, I only want to sell Euros. If I don’t get my move, I will simply buy the Dollar against other currencies instead.
.png "EUR/USD Daily 4/4/12")