EUR/USD rose on light volume during the Tuesday session. The traders came back to the floors around the world, and as is usually the case – optimism reigned at the start of the New Year. However, traders should try to figure out what has changed so much since Friday – and the answer is nothing. The optimism is probably best left to the amateurs going forward as there is also the Non-Farm Payroll numbers coming out on Friday this week. With that in mind, it isn’t a real stretch to think that a lot of the larger firms are probably quite flat at the moment and will more than likely wait until next week to start throwing serious money around.
The direction for the pair has been decidedly down over the last several months, and the Europeans have done little to fix the situation since. The banks are getting almost free money from the printing presses these days, but they continue to park that money at the ECB as opposed to buying sovereign debt, the very hope that people had. This continues going forward, and the debt markets will blow up.
The rise was impressive, but as you can see on the chart, the rise stopped at the 1.3050 area, which is where a large cluster of orders seem to be parked. The 20 day moving average is also at this level, with this in mind, and the trend being so weak – buying at this point is a sign of bravery and perhaps foolishness. We continue to see only weakness going forward, even if we are possibly in the middle of one of the occasional “perm-bull” rally. The fact is that the sentiment is far too poor, and with good reason to actually consider owning the Euro at this point. We are selling the first sign of weakness on the 4 hour chart at this point, especially if we see it before 1.31 or so. 1.35 needs to be broken to the upside for us to consider buying this pair going forward as it would show a serious change in attitude towards the EU in general.
Written by FX Empire