The EUR/USD pair gapped lower at the open on Monday, crashing into the 1.10 handle. This area had enough support in it though to keep the market afloat and we bounced much higher. In fact, we ended up going above the gap, and now it looks like the Euro is certainly going to attract buyers every time it pulls back. Because of this, we believe that this market will ultimately break out to the upside and therefore are very interested in buying pullbacks. We think that the news coming out of Greece of course rattled a lot of nerves, but it is obvious at this point in time that the market quickly got over that concern and started to buy the Euro yet again.
Short-term pullbacks will be buying opportunities but we also recognize that the 1.14 level above is massively resistive. That resistance extends all the way to the 1.15 level, and breaking out above there would signal a longer-term move to the upside. We believe that once we break above there, the entire trend will have changed, and as a result we would be “buy only” at that point in time. Regardless, that’s kind of how we are now that we also recognize that anything can happen. After all, the entire world is focusing on Greece and there is always the concern that perhaps they don’t do what it takes to keep the European Union and Greece together. At the end of the day though, it would probably be a positive event for the Euro as it would eliminate some of the worries.
Ultimately though, this is a choppy and violent market so we would use smaller positions, as the massive volatility of course will continue to make this a very difficult market to trade, but with the smaller position you can hang on and wait until the breakout which of course is going to offer a longer-term and much easier situation to trade. That’s probably happens after some type of Greek solution as far as debts are concerned as fears will be calmed.
