The EUR/USD pair initially fell during the session on Monday, but you can see that the 1.28 level has offered enough support to move the market higher. The result was a hammer shaped candle; however I am still very bearish of this pair as the downtrend has been rather relentless. Looking at this candle, I suspect that a bounce is forthcoming, but I am we look at this as a potential selling opportunity.
While the situation in Cyprus did calm down eventually, it exposed a lot of serious flaws with the European Union. After all, now we have a situation where if you have money in a bank that goes under, you could be expected to help bail it out. Granted, it was only the larger depositors that the EU when after, but in the end this is a red line that has been crossed. Besides, it's the larger accounts that truly matter, not the ones that only have €500 or so in them. When money moves, it moves in large amounts, and this is what shows up on your Forex charts.
I still believe that there are plenty of concerns in Europe, and even if things do calm down for a while, we still haven't fixed anything in the long-term. As a matter fact, I've been saying this for ages and it seems like the market is simply willing to forget about it for roughly 3 months at a time. Maybe we are about to enter another one of those phases, but I seem to think that the strength of the United States will continue to make a difference in this pair as well.
It's simply better in the Americas
Money goes to wear street of the best. It's that simple sometimes, and I believe that's part of what we are seeing. After all, the Euro is falling rapidly against the US dollar and the Canadian dollar, both of which have economic systems that protect the depositors at the bank. There are clear and concise rules as to who gets protected by the FDIC insurance program at American banks, and the Canadians have something very similar. This brings confidence into the marketplace when it comes to depositing your money in a particular country. In my opinion, the Europeans have crossed the line and seriously damages confidence going forward, and we should continue to see Euro weakness overall. Any rally at this point is suspicious to me, and I believe 1.30 should be very resistant.
