The EUR/USD pair continued to be stubborn during the Wednesday trading session as the various problems around the region continue. While everyone around the world focuses on Cypriot banks, there is still an issue in Italy with the lack of a governing coalition. In fact, I haven't heard a peep out of Italy over the last several sessions, which of course means there's probably another shoe to fall.
Looking at this chart, you can see that the 1.30 level has indeed offered a significant amount resistance over the last three days. This was one significant support, and as a result it should. Within this chart though it's hard to imagine a situation where I would be buying the Euro, and the longer this drama unfolds in both Nicosia and Rome, the less likely I am to be pro-Euro anyways.
This isn't to say that the Euro won't get a bounce, far from it. After all, the Forex markets are littered with the corpses of people who have tried to short the Euro over the years. But having said that, we are starting to see some of the worst fears realized as Cyprus is in serious jeopardy of leaving the Eurozone. If that happens, it will be a massive disruption of GDP for the region, but it will certainly rattle a lot of nerves. We could see the Euro fall apart at that point.
Selling the rallies
I still maintain that selling the rallies will be the way to go in this market. I preferred when it on the short term charts, as the long term charts don't have a whole lot of room to move. I see that there is significant support down to the 1.2850 level, so it's difficult to find a daily candle that's big enough to start shorting.
I have been picking at this chart the of the one-hour timeframe, and because of that I think there is a real chance that money is to be made. To the upside, I really don't see a case to make for buying the Euro until we clear the 1.3250 area, or maybe even just the 1.31 level. Either way, I don't see those happening anytime soon and as a result I will continue to sell those rallies.
