By: Christopher Lewis
EUR/USD has been a bit of an issue for many of my trading friends. The pair has continued to defy all logic, and it seems that it is basically working on the news for the next 15 minutes, and not necessarily the longer-term fundamentals. After all, how can you honestly decide to invest in an area that is having issues attracting investors in something as mundane and “safe” as government bonds? As the yields have risen in several of the countries of the European Union, this is essentially the situation that we find ourselves in.
The Spanish have a ten year bond auction on Thursday, and the world will be watching this. The pair is certainly going to be influenced by the bond auctions, and this one is particularly interesting as the last one wasn’t all that successful as bond auctions go. In other words, they had trouble selling their government debts, and when they finally did, they had to pay high yields.
Worldwide rally, except here.
The world’s stock markets rose in general on Tuesday, and the Dow Jones Industrial Average even managed to close just shy of a 200 point gain. The European indices acted very strong as well, and as a rule – this means “risk on”. However, the EUR/USD pair didn’t join the party. Because of this, it is difficult to imagine that the Euro has any real underlying strength as the end of the day saw an almost unchanged candle.
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The lackluster performance on a day that normally would have had the Euro skyrocketing is very telling to me. The daily candle for the Tuesday session ended up being a doji, and this shows a real lack of follow through after the very bullish session on Monday. The high from the session on Tuesday also is shy of the most recent swing high, showing me that the real threat is still to the downside. Because of this, I am selling the Euro yet again, looking to see the 1.30 level finally give way in the near future. When it does – look out below, we are heading to 1.26 or so. I can’t imagine buying this pair.