The EUR/USD pair had a fairly quiet session on Tuesday as we continue to bounce around along the 1.2850 area. This area is significant support as far as I can tell, and the fact that we did not break down below it shows just how much resilience there is going to be buying the bullish traders down here. With even more interesting to me is the fact that even with the "solution" that we saw come out of Cyprus, this pair still couldn't bounce. Because of this, I believe that this market is going to face significant pressure to the downside going forward.
The situation in Cyprus really highlights a lot of the problems with Europe. Even though the market doesn't necessarily pay attention to all of the bad news coming out of the region, sometimes things are just so bad that they have no choice. After all, the genie is been let out of the bottle in the sense that Europeans are now talking about bailing out the banks with depositor accounts. This is something that was not a concern in the United States during the financial crisis, knows result I find it hard to believe that money will continue to flow from right to left when looking at the Atlantic.
However, I would suggest that we are sitting just above significant support. With that in mind, I actually prefer to see some type of bounce in order to start selling again. We need to pick up some momentum in order to break this market down, and a rise to the 1.30 level could give us enough area below in order to crash through that bottom.
Selling rallies
I believe the going forward, this pair will continue to bounce along and there will be opportunities to sell rallies. It's the natural order of the markets after all, buying the euro in selling the dollar. However, I do believe that eventually we will try to visit the 1.25 level in this pair. There is a ton of support below though, and as a result I think this still continues to be a choppy trade with sudden moves based upon erratic headlines.
