EUR/USD had a slightly positive day on Tuesday as the “risk on” trade came back into play. However, I found it very telling that the pair really couldn’t rise much in a session that saw whispers of Fed easing, sending the commodity markets, commodity currencies, and just about all risk assets rising over the course of the day.
The pair failing to rise in this kind of environment makes sense to me, but there is no doubt that the newer traders out there would have been hurt in this kind of trading situation. The Spanish bank bailout has failed to alleviate the concerns in the European Union, and this simply shows the lack of confidence in the Euro – something that is deadly when it comes to a fiat currency. After all, currency has no real value, and it is built on confidence. Once that goes, there is nothing left.
The 1.25 level continues to be a focal point in this pair, and the market seems to be fairly content to hang about in the area. The area is one of the biggest support and resistance levels I have for the longer term charts, so the fact that is a resting area doesn’t surprise me.
Over the next several sessions, all bullish action will more than likely be short lived as the Greek elections loom large this Sunday. There is literally a neck and neck race between the major parties, and there is a real chance of an anti-austerity party being voted into power. Because of this, there is going to be serious concerns for the next week. Once the election is over, there is a chance that the Euro can continue to move higher, but until this is out of the way – all rallies will be suspect.
The pair going forward will more than likely be bearish. Granted, we could see a pop on the Greeks electing a pro-austerity party into power, but this is just the most immediate crisis in the European Union. The truth is that the area has a ton of issues going on at the moment, and the markets will simply just move onto the next crisis. Because of this, any rallies will be sold by me.