The EUR/USD pair fell for most of the session on Monday, essentially as a reaction to the explosive move on Friday. Certainly, with all of the controversy surrounding the European Union, the massive move in the Euro would have been thought to have been a little overdone. With the beginning of the week, we saw the Euro sell off. However, by the end of the Monday session, much of the losses were recuperated.
The basic issues with the Euro still remain, and no matter how much talk Mr. Draghi brings out, there needs to be action – something the Europeans seem almost incapable of. There is a long standing cycle of over promising and under delivering by the members of the EU, and there really isn’t any reason to think this will change soon.
It should be mentioned that the candle for the Monday session ended up printing a hammer. This is of course a bullish sign, and it is also interesting that the hammer seems to be focused on the 1.24 level. This of course suggests to me that the pair “wants” to continue higher.
However…..
However, there is the little problem with the massive amount of “noise” in the charts going all the way to the 1.27 level. In fact, I have advised a lot of my clients that we are entering an area that is more than likely going to create value for them if they are willing to be patient and wait for weakness in the pair.
The Euro will continue to suffer over the long term as far as I can tell as the solution for Europe isn’t in sight. Granted, there are going to be rallies – like the one we have seen lately – but the reality is that the market are focusing (short term) on the possibility of the Federal Reserve easing. Once they make that decision – what’s the next catalyst for Euro strength? A solution? I wouldn’t hold my breath.
The next 300 pips will be difficult for the pair to clear on the upside, and because of this I am looking for a weak candle to sell.
