The EUR/USD pair had a very strong showing during the Thursday session as the European Central Bank failed to expand any type of monetary easing during though meeting for the session. Because of this, the markets look like they may have been expecting some type of asset purchase program, or expansion of existing ones. Since the central bank failed to do so, I believe that a lot of traders were caught flat-footed, and rushed to cover Euro shorts in haste.
Looking at the chart, you can see that the 200 day moving averages right in the middle of this consolidation area, and as a result it looks like we are trying to make some type of decision. This doesn't surprise me, as the nonfarm payrolls number comes out later today, and of course will have an effect on this market.
I am inclined to believe that the Euro selling is not done. I can think of three potential situations with a nonfarm payroll number, all of which could be dollar positive. If there is a stronger than expected jobs number, then it would make sense that money would flow into the United States as Europe is in recession. Naturally, money wants to go where it's treated best, and there will be people that will cover Dollar shorts in a panic because they believe that the Federal Reserve could be raising rates sooner than expected. If that's the case, the Euro would start to fall as well. Alternately though, we could get in in line number and simply watch the market sit still. If that's the case, I believe that eventually the fundamentals will take over again, and this pair will be sold off.
A ton of noise
Look at this chart; I can see that there is quite a bit of noise below the 1.30 handle. Because of that it doesn't surprise me that we failed to break down through it at the first attempt. However, it's obvious that there is a sustained bearishness to the Euro, and as a result it will eventually give way. I also think that the 1.3250 level offers a significant amount resistance as well. Either way, I believe that this pair is going down over the longer term. With that being said though, I believe that we will only get as low is roughly 1.28 or so.
