The EUR/USD pair initially fell during the course of the session on Friday, but surged rapidly during the day and slammed into the 1.14 region. This is an area that has been the top of the overall consolidation area lately, and as a result it’s not a huge surprise that we ran into resistance here. However, it’s really not an area that I think we can break through easily. I think that a resistive candle here makes a lot of sense, simply because we have broken to the upside so rapidly. After all, we gained 400 pips in just 3 days. This is a market that has been extraordinarily choppy and range bound, so I think it can be difficult to imagine that this is going too suddenly to slice through the resistance like it’s not even there.
On top of that, I also recognize that there is a significant amount of resistance all the way to the 1.15 level, so it’s probably more than likely that we are going to see sellers step in and try to take profits. After all, this market is overbought, and it is the end of summer.
Does liquidity matter?
I have to wonder whether or not the liquidity had something to do with how quickly this move happened. After all, this is probably the least liquid of weeks out of the year as it is the end of the summer break. With this, I feel that the move kind of has been exacerbated, and with that I’m not exactly comfortable going long at this point. Quite frankly, if you are getting long of the Euro at this point in time, you are simply chasing the trade. I can think of no better way to lose money.
I think a resistive candle is worth selling, but I think we probably only drop to about the 1.12 level on that move. In other words, it would be a short-term selling opportunity at best. On the other hand, we break above the 1.15 level, I have been saying for a long time that would be a trend change, and that of course hasn’t changed in my opinion.
