The Euro had an absolutely wild session on Friday in reaction to some fairly vague announcements out of the European Union summit. There seems to be a plan in place to capitalize Spanish banks directly, as opposed to going through the sovereigns which had been part of the headaches previously. However, as with all things European related when it comes to this crisis, there are still plenty of skeptics.
You have to keep in mind that I am writing this article on Friday night, so therefore there could be massive changes over the weekend. There is a real chance that once the details come out, but the markets may be disappointed. It is because of this that I believe the open on Monday morning in Asia will be crucial to what happens next. After all, we've been disappointed before. In fact, Barclay’s just released a report that suggested that this rally should be fêted like all of the other ones.
For myself, I don't pretend to be overly intuitive on the direction. I just simply follow at the charts tell me, and that happens to be fairly interesting at this point in time. The search on Friday was without a doubt impressive, but we have to differentiate between a rally based upon risk, and a rally based upon short covering. In the Forex markets, we do not have the luxury of knowing the actual volume traded. Because of this, we can only look at the stock markets and futures markets, both of which had decent volume days but nothing extraordinary.
Flag retested
Looking at the chart, we see a massive move higher on Friday. However, it is interesting to note that the candle stopped right at the bottom of the bearish flag that I have been following. It is because of this I'm not quite ready to pronounce the euro a currency to buy. In fact, the Asia opening as mentioned before could be the key.
.jpg "EURUSD Daily 7212")
A gap up of course would be very positive, and I would have to go ahead and buy if we get above the 1.27 level. But if we find ourselves falling, more than likely because of headlines coming out of Europe or some type of detail that seems lacking, I am more than willing to sell this pair and aim for 1.15 before it's all said and done. Either way, the Monday morning open should be interesting.