The EUR/USD pair continued to be the focus of everyone in the Forex world on Friday. The pair features a currency that many think may not even exist in the last years and as a result there is an extraordinary amount of volatility in this market nowadays.
The session for Friday was mainly bearish, but there was also the usual short covering before the weekend as traders mull the possibility of some kind of bailout in Europe. This has been the case for quite some time, but the rumors are flying around the markets at this point in time because of a supposed plan in the works to recapitalize the Spanish banks. This would be a huge boon for the pair initially, but then one would have to think that the attention will be turned towards the social uprising in Portugal.
The 1.30 level proved to be somewhat supportive on Friday, but the reality is that there are a lot of things that can happen over the weekend. Because of this, there is a lot of suspicion on our part with this rally, and as a result we still can’t buy the Euro. Besides, there is a huge chance that any rally gets faded because of the previously mentioned Spanish social riots and there are many chances of austerity measures next in line to be adopted by the Spanish Government. The concerns aren’t necessarily of Spain leaving the European Union, more like whether or not it will be orderly.
The 1.30 level proved to be resistive this previous week, and it is likely to be in the future as well. The Chinese are releasing a slew of economic data this weekend, and there is open speculation that it could be poor as they cut rates earlier this week. This means that shocks are possible from different directions obviously this is something that is never good for the risk trade.
All of this information makes predicting a bit difficult at this point, but the chances are that by the end of the week, we will see the “take off” none the less. Because of this, we are much more comfortable buying Dollars at this point. If this pair rallies, we are willing to fade it. If it gaps down on Monday morning, we are willing to sell then too.
Looking at the EUR/USD daily chart we note that the bearish pressure did crush the 1.3 line and sent the currency pair towards the 1.28 support. SMA 20 ( RED ) = Bullish SMA 50 ( BLUE ) = Bullish
While both SMAs remain bullish, we should monitor 1.29. The SMA 200 ( BLACK ) usually functions as a support of sorts and if it fails together with 1.29 due to overwhelming bearish pressure, the next bearish target will be 1.26 which will mark a reversal of the previous bullish rally.
It is well known that eventually the Euro falls, but in the meantime it looks like we have to go to the upside.