By: Christopher Lewis
The EUR/USD pair has been beaten up pretty severely over the last few sessions, and it appears the bears are finally starting to reassert control in a pair that seems to be somewhat impervious to gravity at times. The problems in Europe seem to have been put to the back burner lately, but it is obvious this is no longer true.
The minutes by the Federal Reserve sent shock waves through the markets as the possibility of further quantitative easing in the United States seems to be much smaller at this point. Adding to that is the comments by Mario Draghi of the ECB during the session that was very dovish to say the least. Also, Spanish bonds had a hard time selling during the Wednesday session as well. None of these factors will help this pair rise at the moment needless to say.
Crossroads
The pair seems to be at one of those “inflection points” that can drive the momentum going into the intermediate future presently. The 1.35 level now looks as if it is the “top” of the market now, and will not be challenged anytime soon. The 1.3250 level gave way, and as a result I am short of this pair, and aiming for the 1.30 handle. It is at that point that I expect the next serious attempt at support. Below that level – and the next 4 handles come quickly.
.png "EUR/USD Daily 4/5/12")
The Friday Non-Farm Payrolls number will have a effect on this pair as well. If we get strong employment numbers out of the United States, there is a real chance this pair falls again as money leaves Europe for the one major economy that looks to expand – America. Conversely, if the labor numbers are poor, there could be a run to the Dollar as well, as we know that Europe has issues, and bad employment news could have the markets running to the Treasury markets. Either way, there is a very real chance that this pair continues to fall. My strategy is simple: sell the rallies until we manage to break above the 1.35 level. If we get the daily close below 1.30 that I want to see – I am adding to the position.