The EUR/USD pair fell during the Monday session, as the 61.8% Fibonacci retracement level offered resistance. This happened to be just at the 1.28 handle, so the two combined were probably a bit strong for the buyers considering how strong the move was on Friday.
The pullback should offer some type of buying opportunity though, as is pair looks cleared to run as high as 1.30 at the moment. There is a lot of anticipation that the Federal Reserve will extend its quantitative easing measures, and as such this would of course put a bid in this pair for the meantime.
Of course, we have to keep in mind that the European Union is far from being a healthy, and as such these moves higher could be somewhat limited in their scope and length. Because of this, we think that the move higher will stall at the 1.30 level, and would sell weak candles as they appear in that general vicinity. This area is a massively resistive area based upon the descending triangle that we solve earlier this year, which had the 1.3 level is massive support. As per basic technical analysis, the former support should become massively resistive, and the fact that it is at one of the large numbers suggests to us that is a bit of a no-brainer to look for short positions in this area.
Please be aware that there is a lot of headline risk out there right now, and as such the Euro could be very volatile. After all, the Dutch have national elections which could upset the balance of how the Netherlands reacts to European stability measures. Also plaguing the headlines will be the High Court decision out of Germany, as to the constitutionality of the ESM. And finally, towards the end of the week we will have the Federal Reserve meeting and announcement.
With all of that in mind, there is a taunt of risk events out there. We still believe in the strength of this currency pair on till we have the 1.30 level, and as such plan on buying dips. In the long run though, we are very bearish of the Euro.
Written by FX Empire