The EUR/USD pair was tossed around during the session on Thursday as one might have expected it to be. After all, the markets had rallied on the “hopium” of potential easing by the Federal Reserve that is coming, and the Chairman Ben Bernanke was getting ready to testify before Congress. This had the market rallying on - wait for it….rumors.
We have seen this movie before. There is always a new bailout plan, a central bank that is easing, and various other potentially bullish scenarios. However, time and time again we have seen these rumors to be useless. Bernanke didn’t mention that he was interested in easing, and in fact even admitted that the next move won’t have the effect that the earlier ones did as it is a case of diminishing returns.
Back to reality
The shooting star that formed for the session was indicative of a session that initially saw hope of easing, and therefore a Euro gain against the Dollar. The candle shows that the market looks weak again, and the 1.26 level looks like it is holding down the bulls at the moment. The area that the market trades in at the moment featured four shooting stars two weeks ago, and this shows a potential area of serious resistance.
The fact is that the European Union is in serious trouble and this hasn’t changed. In fact, even if Bernanke had said he wanted to ease again during the session, this wouldn’t change this fact. The debt issues and political bickering continues to work against the Euro overall, and as long as the problems persist in that region, the Euro will be vulnerable. Unfortunately for Euro bulls, this could go on for years.
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The Chinese cut rates overnight as well, and this shows that the central banks around the world are starting to ramp up the “race to the bottom”, and will have a lot of traders worrying about what the bankers currently see. Because of this, I have a really hard time buying the Euro in this environment. On a break of the bottom of Thursday’s range, I am selling again.