The EUR/USD pair had a strong showing on Wednesday as the 1.30 level has offered significant support. This also would have been predicated upon the idea that the Italians managed to sell a significant amount of bonds earlier in the day, without paying an outrageous yield. There are still plenty of headwinds coming out of Rome at the moment, however the market seems like it's ready to forget about it for the short term.
I still think this pair is extraordinarily bearish, and I also see the 1.3250 level as being very resistant. It isn't until we clear the 1.33 level on a daily close that I begin to feel comfortable buying the Euro. Perhaps it happens, and then of course I have to adjust my strategy. But in the meantime I am not willing to buy the Euro, and fully expect to see some type of resistive action at the 1.3250 level.
The European debt issue is still here
If the election in Italy told us anything, it's that the underlying problems in Europe are still very much alive. I understand that perhaps the selloff has been a bit extreme lately, but as long as the Italians do not for some type of coalition government, there is a strong possibility that the Euro will suffer at the hands of negative headlines. Because of this, I am not willing to take this risk, as there are simpler ways to play a "risk on" strategy. It would not surprise me at all to see the market suddenly fall in love with another currency, such as the New Zealand dollar.
I believe that the Euro does look good against several currencies right now, but by far the hardest fight it will have is against the US dollar. After all, the US dollar is the ultimate "safe haven trade", and as a result will get supported every time something fishy comes out of Italy. I will be looking for resistive candles near the 1.3250 level, and of course would sell aggressively if we closed on the daily chart below the 1.30 handle.