By: Christopher Lewis
The EUR/USD pair has been one that I have been fairly hesitant to commit too much time and capital to over the last several months. The rise in value of this market is one of the most perplexing moves that I have seen in a long time. Everywhere you look, there are plenty of reasons to be short of this pair, and to avoid only anything European, yet on only the slightest hint of good news – this pair will take off.
The solutions that have appeared in the European Union to all of the financial problems are mainly of the temporary variety. The truth is that a lot of the problems are going to come from the fact that structurally it makes no sense for some of the countries to be involved. Also, there is that bit about the fact that Europeans as a whole have gotten quite comfortable with receiving generous benefits over the years. The reality is that the cost is far outweighing the contributions, and the debt levels in several countries are only going to go up in the future by way of aging demographics.
Quiet day
The session was quiet for the most part on Thursday, and the market sat fairly still as a result. The 1.3250 level below should continue to offer some sort of support for the market though, and selling at this point – even after the move down on Wednesday – is very difficult to sell now. In fact, a bounce is probably more likely at this point, but breaking the 1.35 level is highly unlikely in the near term.
.png "EUR/USD Daily 3/2/12")
As for going forward, this pair looks like it is set to chop around even more in the near term. The 1.35 level should continue to be a cap for the market, and the 1.3250 should be supportive. Certainly the 1.30 will be supportive as well, so under the best of circumstances we will continue to consolidate between those two levels. However, as this pair has shown us lately, it is far more comfortable chopping around in tighter areas. I am presently looking at this market as a consolidation/range trade, and am using smaller positions.