EUR/USD had an interesting session on Thursday as the Euro gained on a lot of different forms of speculation. We have seen this over and over: traders will get bored of selling, and come up with a laundry list of possible reasons for the Euro to rally. Sometimes it is an impending bailout of Spanish banks, sometimes it is Middle Eastern central banks to the rescue, other times it is coordinated central bank moves, as was the case for the Thursday session.
The markets were abuzz with possible Federal Reserve easing in the earlier hours of the session as the weak economic outlook and slowing economy has many thinking the Federal Reserve will ease soon. This of course weakens the Dollar and the Euro benefits as a result. (Somewhat by default if nothing else.)
Towards the end of the US session, several headlines hit the wires suggesting that there was some sort of coordinated central bank move waiting to happen if the Greek elections turn out to be bad for the austerity bunch. The Japanese, Canadians, and British all even went so far as to state it. But in the end, what do you have? You have central banks willing to add liquidity to the markets in the case of a meltdown. Was there ever any doubt?
Liquidity isn’t intervention.
The pair is acting as if the central banks are going to directly intervene. This isn’t what they were saying, and I suspect this will sink in after time. Besides, very few will be brave enough to have a long Euro position on for the weekend. Oanda is so concerned about the potential volatility that they aren’t allowing traders to take on positions in the Euro until much later than usual. (The broker will normally allow a trader to initiate a position over the weekend.) This shows how worried they are about getting their heads handed to them in a meltdown.
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Because of all of this, there really isn’t a technical trade to take in this pair. The truth is that the election in Greece is far too tight to call, and as a result there will be a volatile session to be seen this afternoon. The smartest play is to stay out of this pair.
Any trade at this point in time is simply gambling.