The EUR/USD fell during most of the session on Monday, in order to crack the 1.22 level. The pair has been following rather relentlessly over the last couple weeks, and as a result we have found a bit of a temporary bottom in the form of the 1.2150 level. The daily candle was a hammer, and this of course looks to be rather bullish on the whole.
As for myself, I won't be buying this on a break higher. If you've been reading my articles, you know that I am very negative towards the Euro right now, and feel that the prudent trading is to sell the Euro as often as possible. One of the main reasons I believe that this will continue is that the situation in Europe simply hasn't changed. We are still in the same mass that we have been over the last couple of years.
The reaction on Monday would have been to the weaker than forecasted retail sales number coming out the United States. While this would suggest that quantitative easing could be that much closer at this point in time, I believe that many of the traders out there are looking for Ben Bernanke to give them some kind of hint towards quantitative easing during the congressional testimony that he is to give later today. Needless to say, if he does there should be a Dollar selloff.
Nothing's changed
Although I see the potential for rally in the short term, I believe that the 1.24 level begins a massive resistance area that will not be overcome. There could be a knee-jerk reaction in reaction to something Bernanke says, but my suspicion is that those rallies will be faded by larger accounts as the situation in Europe will not change if there's quantitative easing out United States.
The alternative of course is that he doesn't mention quantitative easing at all. If he doesn't, there's a good chance that this pair balls from this point. A break below the 1.2150 level has us trading down to the 1.20 level in relatively short order, and as a result I would be aggressively short at that point. As for buying, I simply won't do it. However, I have to admit that if we broke above the 1.2750 level I would have to change my opinion.
