The EUR/USD pair had a fairly wild session on Wednesday in order to eventually have a slightly negative day. The resulting candlestick formation looks a lot like a hammer, but it is far too stuck in traffic in order to consider it as such. The formation simply suggests that the level below, the 1.30 mark, is going to be very difficult to break through. (As if you haven’t already noticed by now.)
The markets are without a doubt waiting for the auction results out of Spain today that will show just where the debt markets in that country area. If we get a poor auction, this pair could really start moving to the downside, and this could be the catalyst that the bears need in order to break the 1.30 barrier set by the bulls.
The area is an obvious point in which to set sell orders. In other words, if we get a daily close below it, it would make perfect sense to sell at that point. However, the pair has several other levels that look interesting for sell orders as well.
For example, the 1.3250 level above still looks as if it wants to be at the very least minor resistance. At this level, any signs of weakness would have to be sold as it has produced a reaction several times in the past. The 1.35 level is an obvious resistance area as well, and it is here that we look to sell on signs of weakness as well.
Alternately, if we get the daily close above 1.35 – then all bets are off and we go long. Doing this would suggest that the momentum has shifted, and we would have to respect that. However, there are far too many issues in Europe right now to think this is a likely outcome. Even if we get a good Spanish bond auction, there are many other issues in the area as well, and the pop in the EUR/USD pair form something like that should more than likely turn out to be a “sell the rally type of situation.”
Written by FX Empire