EUR/USD had an interesting session on Friday as it rallied fairly significantly, based upon the words of Federal Reserve Chairman Ben Bernanke at the Jackson Hole, Wyoming central bankers meeting. In this speech, the Federal Reserve Chairman suggested that the American central bank could begin to buy US treasury bonds and increasing numbers if needed. This of course put the US dollar on the back foot, and of course the Euro was a significant beneficiary.
However, there are many other factors going on in Europe that could be an anchor around the neck of this currency. There are a lot of different things going on at the same time in the European Union, and as such it seems like the headline risk is extreme at this moment in time. Because of this, the Euro is one of the most difficult currencies to be bullish on at this moment in time.
Even though we saw the rally during the Friday session, it's very difficult not to notice the fact that half of the gains were erased by the end of the session. In fact, we simply ended after weeks previous highs, and essentially saw no new ground by the end of the session.
Shooting star
The candle for the Friday session looks a bit like a shooting star, and it's even more important that the weekly candle looks like a shooting star. We are currently right in the middle of a massive resistance area, and as such we think that the path of least resistance is still down that no matter what has happened.
The pair is been in an ascending channel for some time, and we did fail at the top of it again. It should also be noted that the top of the Friday session is the 50% Fibonacci retracement level from the plunge back in April. At the bottom of the shooting star and the Tuesday lows, I would be aggressive in selling this pair as it would show that it simply cannot go any further. I truly believe that the Euro is living on borrowed time, and as such I have been waiting for a sell signal that simply hasn't come yet. I will admit however, that if we get above the 1.27 level on a daily close I would have to be long.
