The EUR/USD pair rose during the session on Thursday as the 1.30 level held firm as support. The area is a 200 pip “zone” of support that continues to frustrate the bears, and shows just how supportive this market is at the moment. However, the overall problems in Europe are far too worrisome for us to think of buying this pair, and as such we have just a couple of options in this pair.
The first option for us is to sell on a breakdown below the support area. If we get this, we think it could lead us down to 1.25 or so, and perhaps even lower before it is all said and done. With the Portuguese bonds spiking lately, there is a real chance that we are going to see another Greece happen, except this time it will revolve around things going on in Lisbon, not Athens. The bond markets there are already beyond sustainable, and this is a situation that the Europeans are going to have to address soon. In order for us to sell in this scenario, we need to see a daily close sub-1.29 as it is the “bottom” of support for us.
The other trading opportunity that we see is to sell rallies. The 1.3250 level is an area that we have seen act as resistance lately, so a bounce back to that area has us looking for weak price action. We will sell right away if we see it, but the market will have to bounce first to get there. The 1.35 level above is even more resistive, so we are comfortable selling on signs of weakness at that area as well. If we manage to smash through the level, it would manage to change our minds, but with all of the trouble we see coming out of Europe, this is a very unlikely event in our mind.
We like selling this pair every chance we get, but we need to do it carefully. The trades have paid well, but are mainly of the short-term variety in most cases. Whether or not this changes that remains to be seen, but a break under 1.29 is a great start to it.
Written by FX Empire