EUR/USD is a complete mess. In fact, it only reflects whatever scheme the Europeans are trying to pull off at the moment. Quite frankly, the Euro and European Union is a completely flawed concept, and it appears that we are finally seeing the realization of the ridiculous concept of the currency.
The Europeans are finding out that you simply cannot have rich countries carrying poorer ones. Certainly, people in Bremen and Frankfurt don’t want to support those in Athens or Madrid. The governments in the south have simply spent too much and promised their people things that no reasonable person would expect to last at the rates in which they were spending. The variance of spending in the countries in Europe as well as the very nature of the economies ensures that no one policy can work for all of these various countries.
The pair is the center of the world at the moment, and will continue to be so for some time. There are many other pairs to trade at the moment, but this is the one that everyone watches. However, I don’t think people truly understand that we may be seeing the beginning of the end for the current form of the Euro. You simply cannot have this kind of wealth transfer between countries without some kind of anger within the electorate, and as a result governments will fall. As an aside, the French Socialists are now in control as of this past weekend. Spending in France certainly isn’t going to slow with them in charge.
1.25, here we come.
The market looks dead set on trying to reach the 1.25 handle. The market almost looks like a bearish flag, but the channel that forms the body of the flag is a bit long. It should be noted that the EUR/GBP pair does look like a bearish flag, and shows serious weakness in the Euro as well.
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With this in mind, I am only selling Euros. I will fade rallies as soon as they show some kind of weakness. A break below the 1.20 level also has me selling. A daily close of over the 1.30 level is what it would take to get me to buy at this point.