EUR/USD had a bullish session on Thursday as the 1.2250 level has held as support again. The candle did not quite clear the top of the shooting star from the Tuesday, but the action was bullish enough that it essentially would mean the same thing. In fact, I have to admit that I am somewhat impressed by what I see as a relief rally.
However, we are still within the rising wedge that I had mentioned over the last several days, and as such I don't see a reason to buy this currency pair. As you know, there are a plethora of problems in Europe right now which keep me from buying this currency. Also, I have to admit that the problem is so complex it isn't easily understood. This is one of the worst scenarios to invest in, things that you simply know nothing about. One of the most obvious examples was the MBS markets, which stands for mortgage-backed securities. We all know how that turned out.
I know it's a bit of a stretch to compare the Euro to the MBS markets, but the truth is both share one common theme: nobody really knows where the bottom is. The fact that the Euro is rising could very well have as much to do with the fact that there is almost no volatility right now, rather than anything to do with bond yields.
Spanish banking bailout?
There were plenty of rumors floating around the markets during the Thursday session that the Europeans were about to come together with a package to bail out the Spanish banking system. This is one of the most concerning parts of the financial crisis at the moment, and of course this will create a sense of relief. The problem lies within the fact that the banking system needs a bailout in the first place.
I see the uptrend line of the bottom of this rising wedge as my sell signal. If we can close below it on a daily candle, I am more than willing to start selling this pair again. However, it does look like we wanted drift higher. We could see as high as 1.25 before massive resistance comes back into play. Because of this, I am more than willing to be patient and wait for a nice sell signal in which to start shorting. I have absolutely zero intentions of buying the Euro.
Jesse Livermore, someone who is arguably one of the greatest traders of all time one stated that we get paid to wait. This is one of those times that Mr. Livermore would have been the only person in the room willing to wait on the right set up. I intend to follow his example.
