The EUR/USD continued to be the hotbed of problems in the Forex markets on Monday as the original gaps around the FX markets got reversed, and this market certainly wasn’t any different. It appears that the short covering rally was just that, and as traders looked at the deal for the Spanish banks they liked the “solution” less and less.
As a result, we are now in bear mode yet again. To be honest, I expected to fade the rallies and even wrote as such. However, I didn’t expect the rally to fade after roughly 9 hours. I assumed there would be a day or two in it at least. The fact that this reaction was reversed so quickly is indeed a very poor sign for the Euro bulls out there. (Are there truly any left at this point?)
The Irish are now talking about how unfair their deal was, and that it should be retroactively worked out to mimic the Spanish deal. No surprise, as the whole idea that 17 nations can be sovereign and also under the same fiscal umbrella is unrealistic. This is becoming more and more obvious every day, and now instead of everyone looking at the EU and thinking how great it is that Germany is going to life everyone else up, they are starting to look at the European experiment in the view of it is only as strong as its weakest member – and that’s pretty weak at the moment.
1.25 get sliced through – again
The move on Monday was a strong one, especially considering that we saw a gap get filled and more – something that normally doesn’t happen. The reaction to the Spanish bank bailout isn’t a good one, and it now looks like we are going to fall much more over time. Because of this, I see absolutely no reason to change my strategy at this point. Adding to this mess is the fact that the Greeks are going to be voting again this weekend. In other words – there is a ton of uncertainty again.
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I am selling rallies when they show weak candles on the 4 hour charts all week. The pair is simply a “sell only” one for me at the moment, and this won’t change until we see a daily close above 1.30 as it would show a serious swing in momentum.