The Forex markets tend to consolidate for long periods of time, only to be followed by sudden moves. It is the latter of the two possibilities that we have been in for some time, and these are the times that the best gains are to be found. For full disclosure, I should go ahead and say that I haven’t bought the EUR/USD in months. I haven’t always been in the market, but I haven’t been long at all.
The fact is that there has been a seemingly never ending barrage of bad news out of the continent, and one has to wonder what would have happened if all of this nonsense had been going on with the South African rand, Indonesian rupiah, Brazilian real, or other such currencies. The fact is that the Euro has a bit of an ingrained bid in it with Forex markets, so there is almost always someone willing to buy.
The fall recently has been stunning, but truth be known the 1.30 level held much longer than I expected. Once the level finally gave way, we finally found the 1.25 level that I had been calling for, based upon a descending triangle.
1.25 violated
The Tuesday session saw the 1.25 level violated, but a real “flush” hasn’t been had yet. However, I think this shows just how weak this pair is at the moment, and the now four in a row shooting stars on the daily chart show a relentless pursuit of the downside by the markets. One really has to wonder how much longer the bulls (yes, I am looking at YOU People’s Bank of China…) can fight this freight train of a move.
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I believe that bounces can happen, but they will simply continue to be gifts from the market. Every time I see one, I look at it as a chance to sell Euros from higher levels. I will continue to fade rallies until some kind of solution appears out of Europe. At this rate, that could be a long time from now. I will also sell on a break of the bottom of the Tuesday session.