The EUR/USD pair initially gained during the session on Thursday, but as you can see on the chart once we met the 1.3050 level the sellers came in and took over again. This pair is essentially be held hostage by the U.S. Congress right now and the media circus that they insist on having through the so-called "fiscal cliff talks.” The fact is that the Congress has decided to air out its dirty laundry in public, and this has been throwing the markets around quite a bit.
The dysfunction of the U.S. Congress is quite shocking, but is already getting a bit long in the tooth. People are starting to react less and less, and now the conventional wisdom seems to be that something will be done between now and the end of the year, but it will be a "kick the can down the road" type of solution. In other words, they won't let all of the tax rates reset to higher levels, but won't necessarily fix the problem either.
Nobody seems to be talking about cutting entitlements. This is essentially one of the biggest problems, as we are looking at ways to raise taxes, but not cut spending because of this, the US dollar to find itself under pressure in the long run as more and more debt and spending keeps getting piled on. Quite frankly, I am very bearish of the Euro as you all know, but if it weren't for the debt crisis, I think this pair would probably be about 1.80 or so.
Conflicting candles
With the shooting star that was printed on Thursday, and the hammer that was printed on Wednesday, I see this is a very confused pair and one that will more than likely remain quite choppy for the session. In fact, I simply don't like this pair right now as it is behaving erratically at best. Having said all this, you have to admire the fact that has remained resilient enough stay above the 1.29 handle. If I was forced to make a decision, I would suggest that this pair probably goes a bit higher.
