The EUR/USD pair broke down again on Wednesday, but this time tested the 1.05 support level. This of course is a large, round, psychologically significant number, so it does not surprise me that the buyers stepped in. In fact, I would not be surprise at all to see a little bit of a bounce from here, as a lot of the larger traders out there will use round numbers for profit taking and order entry. With this, I believe that the bounce that’s coming should simply be a nice buying opportunity. I don’t anticipate much of a bounce, but I would think that there should be some type of reaction.
I believe that if we break down below the 1.05 level, we almost have to go to parity. At that point. There simply isn’t anything on the longer-term charts, that shows signs of significant support, so with that, I don’t have any scenario in which a willing to buy this market. I think that the 1.10 level above continues to be the ceiling, and that any move towards that area will be sold.
Selling short-term rallies.
Truthfully, I have been selling the EUR/USD pair because of the options market on short-term charts. This is because it affords me the ability to enter the market as often as needed, and with a limited amount of risk. After all, when markets break down like this, they quite often have massive bounces from time to time. This way, I can simply limit my risk and go with the longer-term trend. Ultimately though, I think that longer-term traders continue to hold this pair short, and that it’s not until we get to the parity level that we will see a significant attempt to stabilize the marketplace.
I believe that the sellers will be waiting above, and as a result any short-term rally that shows a sign of weakness I am interested in selling. I think that the 1.120 level will be massively oppressive for the buyers, and as a result I do not anticipate breaking above that level anytime soon.
