The EUR/USD pair continues to be the gift that keeps giving. By now, it should be absolutely obvious to you that the pair is to be sold, not bought. However, a lot of new traders hand money over to more experienced traders by going long a pair that is “obviously oversold”. This pair is a great example of when a pair is oversold, you just don’t sell…..but that doesn’t mean you have to buy. Think of it this way: If the pair is falling, would you rather catch a small bounce to make a few Dollars, or would you rather wait for the bounce to rejoin the trend and make a much larger profit?
The pair got a bit of a lift over the weekend by what else but rumors. The latest is that the Europeans are coming up with some kind of scheme to form a fund to bailout banks. This got the bullish traders long, and many of the weaker players out of their short trades. However, by the very fact that a bailout is needed suggests that there will be some form of easing, and this means a lower Euro.
1.25 is still crucial
The 1.25 level still looks very crucial, and the fact that the candle for the Monday session is a shooting star for the third day in a row suggests that it will be attacked yet again, and eventually broken through. The level is crucial for the bearish trend to continue, and we think that eventually the bears will overrun the support. If and when this happens, the 1.20 level should be the next target.
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Granted, there is always some kind of “hopium” trade out there for the Euro, and this will lend itself to produce pops in this pair from time to time, but the reality is that Europe is a problem that will more than likely be around for a few years. Eventually, the conclusion of the drama will happen, but it appears that we are much closer to the start than the end. I am selling the Euro, and never buying it. A daily close below 1.25 has me selling. A rally with any signs of weakness has me doing the same.