EUR/USD had a very calm session on Tuesday as the world of Forex still looks forward to the European Union summit on Thursday and Friday. The markets had been very generous previously with these summits, as the participants would buy the Euro in anticipation of finally getting a comprehensive result from the meetings. After the lackluster announcement comes out, the markets would then sell off. This time seems to be different, as the market isn’t willing to be caught yet again trying to believe in the leaders in Europe, only to be disappointed in the end.
It now looks as if the market finally gets it: The problems in Europe are going to be with us for some time, and the solutions aren’t going to be easily reached. The Euro could be reaching a new chapter in the story, and I believe that the summit will reveal this. I firmly believe that the failure that could happen this week will send the Euro much lower.
Hammer And 1.25
The daily candle did in fact manage to form a hammer. However, one would be absolutely reckless to buy at this point, as we are just a few days from the end of the meeting that will undoubtedly move the markets. It seems to me that we could perhaps see a consolidation of sorts over the next couple of sessions, with the 1.25 handle being the center of the action.
The selling of the Euro is my trade, and I am willing to do it on rallies – if they come, and after a sign of weakness. I am willing to sell on shorter time frame charts as well, as they signals may happen on a quick frequency than the typical daily charts I like to use. The 1.26 level above should remain resistive, and the market is a “sell only” one for me at this point in time.
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There is also the possibility that the headlines coming out of Europe could push this market higher on a surprise, but I feel that the rally will simply be used by the larger players as a chance to sell the Euro at a higher price – something I would be looking for on a large spike higher as well.