The EUR/USD pair had a wild day on Monday, as the Italian elections got underway. It seems that most of the market expected the Italians to vote for further austerity and a pro-Europe agenda. However, the parliamentary elections produced many non-austerity candidates, and as a result many of the Italians out there decided that they were done with austerity. The results are still coming in as I write this article, but it certainly has caught the market off guard.
Looking at this chart, you can see that we initially surged much higher during the session on Monday, breaking the 1.3250 barrier. The markets obviously had expected about the Italians would go along with what they demanded of them, and when it became apparent that they would not roll over so easily, you can see that the markets took a massive plunge down to the 1.3050 support level.
Uncertainty
One of the most despised things by market participants is uncertainty. The fact that so many anti-austerity candidates got elected in Italy certainly throws a lot of that into the marketplace. European debt crisis has resurrected itself and one shocking turn of events; although anyone who has been paying attention knows that it really hasn't gone anywhere.
With the candle that prints like this, it's hard to see a scenario where we bounced back up rather quickly. I think that there is still weakness to follow, but we are close enough to the 1.30 level that it may be difficult to short this market at present levels. This will be an extremely headline driven market over the next couple of days, and as a result it is probably no place for the novice trader to be at. With that in mind, if you have not had much Forex trading experience, this will not be the pair for you.
When markets are uncertain, they tend to go back and forth and cost everybody money. This is what I think will eventually happen over the next couple of sessions, we will simply get whipsawed back and forth. With that in mind, I am not trading this pair at the moment, but do think we have farther to go to the downside.