By: Christopher Lewis
The EUR/USD pair is one that many traders love to fight about. While a lot of people have recently wondered how this pair can stay aloft, there are many different reasons that people have come up with. Some people believe it is because the ECB is able to “sanitize” the money that they are pumping into the banks while some believe it is simply because the ECB is willing to bailout the banks. Still others think it is the fact that the IMF came to the rescue Greece.
The bond markets are telling a different story though. Just ask the Portuguese, Greeks, Spanish, and Italians about how things are going for them. When they do sell bonds – it is at a much higher rate than they are comfortable with, and in smaller amounts at times. In other words, the real bosses could be coming to rearrange the workplace…..the bond holders.
1.30 Is Huge
The 1.30 level has been holding this market up over the last few months, and again, there are plenty of theories as to why. Personally, I believe the one that says a lot of Asian central banks are trying to defend the level as they have diversified into Euros over the last several years and have a vested interest in keeping it a bit higher. However, this doesn’t matter truth be known as the only thing that matters is that the level is supportive and needs to be overtaken for the market to fall.
.png "EUR/USD Daily 4/16/12")
With all of this in mind, it is apparent to me that we need to see a daily close below the 1.30 level in which to short, and the extremely bearish candle on Friday, it looks like we may see a real attempt at finally doing it. If we get that daily close below the 1.30 level, I believe we are going back down to the 1.26 level, and possibly the 1.25 as well. Either way, I will be short of this pair. If we get a bounce, I will be looking for weakness to sell as the market goes higher.