The EUR/USD pair had a fairly back and forth session during the Tuesday trading hours, eking out a small gain in the end. However, when you look at this candle, you can see that the range was relatively tight overall. On the chart, you can see a red moving average that I have placed, the 200 day EMA. With that being said, it appears that the 200 day EMA has provided a bit of resistance to the buying of the Euro.
On the other side of that equation, we have the 1.3000 level that of course is a major psychological support area. With a "big round number" like back, there is always going to be some type of buying and selling interest. Looking at this chart, I believe that if we get below the 1.3000 level that we will run into quite a bit of noise, and that's probably what is keeping this market a little bit higher than one would anticipate.
However, do not forget that the Italian election problems still loom large. Is because of this that we could get a headline out of Rome at any moment thickets in this market much lower. Also, Thursday has and ECB meeting that of course could produce fairly significant headlines as well. Whether or not the European Central Bank chooses to cut rates is an entirely different discussion, but it is certainly a possibility. In fact, most traders expect in the do that sooner rather than later.
Selling the rallies
If we do manage to rally from this point, I believe that the 1.32 level will provide enough resistance in order to create a selling opportunity. I also believe that selling the rallies will probably be the way to go in the relatively short term, as the market simply looks like it's trying to forget about problems in Europe yet again. Sooner or later, the same issues come back up, and the result is always the same: selling of the Euro. While I am not calling for meltdown, I firmly believe that the 1.3000 level will be broken to the downside relatively soon. If I get that rally, I am even more interested in selling as it shows that we could have a bit of momentum as we fall. Alternately, a daily close below 1.3000 is enough to have a start selling as well.
