By: Christopher Lewis
The EUR/USD pair has been frustrating for those of us that expect its total destruction someday. The pair continues to fight at the 1.30 level, and by now everyone knows that someone is there defending the level. The most credible stories revolve around the Asian central banks trying to keep their reserves in decent shape. The central banks started to diversify a few years ago, and are certainly alarmed at the dropping value of their reserves as the Euro plummets against almost everything.
The Greeks have elected many leftists this time around, and most are openly stating that the austerity measures are “null and void” at this point. This absolutely terrifies some of the Europhiles as the very union itself is going to be under pressure if this truly does happen. However, the Greek economy is essentially in its fifth year of massive contraction, and there is only so much pain that one can expect the populace to put up with.
The Germans are the ones that the markets are looking to in order to bailout the rest of Europe, which needless to say is very unpopular in Bavaria, Westphalia, and the other states. The local elections reflected this as well over the weekend. Germany simply won’t be footing the bill for much longer.
And then there is the whole thing about the French electing a leader that wants to renegotiate the austerity pacts. Things are starting to look very dangerous in the Euro zone. In fact, with the basically open rebellion in Greece, many think it is the beginning of the end for the currency. I am one of them, but think that there will be some kind of European currency left in the end, but it will be based upon the northern states.
The 1.30 level
I have been talking about this level for what seems like forever now, and it has finally been pierced and moved below. However, we still see the bulls fighting in the area, and it simply won’t roll over and die at this point. However, as this fight drags on, you can see that prices are drifting lower. This leads me to believe that this pair will eventually capitulate.
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I am selling this pair every time it rallies, and on the new lows. I simply cannot think of a reason to buy at this point, and certainly wouldn’t until the top of the triangle is blow through.