By: Christopher Lewis
The EUR/USD pair continues to be one of the most volatile markets out there available to Forex traders. The recent action has been very back and forth, and with the never ending headlines coming out of the European Union, this isn’t much of a surprise. On one hand, you have the eternal optimists; on the other you have people that see the problems in Europe as basically unsolvable. Somewhere in the middle you have the average market participant trying to work their way around the mess.
The Friday session saw a drop in value of the Euro from the start of the session. The Greeks were officially said to be in default finally by the CDS markets. The country will now have to figure out to go back to the markets. The reality is that the ECB is going to be buying a lot of Greek debt, and for much longer than it wants to.
1.31 to 1.29
The area that the market stalled at is just above the 1.31 level, and this is an area of considerable support as far as I can see. The level from 1.31 to 1.29 can be thought of as one large, thick support zone. The 1.30 is the focal point obviously, as it is in fact the “round number”. When the market approaches very large support and resistance areas, it isn’t very uncommon for the levels to be padded by 50 or even 100 pips on either side. This is what I feel is going on at the moment.
The easier path for the moment is probably to the upside, but the fact is that we have seen a serious rejection of price at the 1.35 level, the next major resistance area. The next minor one has also seen rejection a few times in the form of the 1.3250 level. With this being said, I believe a bounce is coming, but it will be temporary in nature.
I am looking to sell at 1.3250 with signs of weakness, or on a daily close sub-1.29 as it would show a clearing of this area. In the interim, it is very likely that the pair will continue to bounce around in the current neighborhood.