The EUR/USD had a remarkable session on Thursday, reaching over for handles at one point. This market is without a doubt testing major resistance above, and quite frankly I feel that today could be the most important trading session for the value the US dollar going forward. After all, this was a knee-jerk reaction in general to the European Central Bank adding much less stimulus than anticipated. With that being the case, the Euro suddenly felt oversold.
However, we have to keep in mind that the jobs number comes out today, and that could send money flowing right back towards the US dollar. I believe that the 1.10 level is of course psychologically significant and resistive, and I cannot help but notice that we closed below the bottom of the trend line that had formed the ascending triangle previously. In other words, I think the markets made all of the “easy money” off of the system shock that the ECB provided on Thursday.
Liquidity?
I also have to question whether or not there was much liquidity. After all, a lot of traders would not have felt comfortable putting on large positions just 24 hours before the jobs number out of America. Because of this, I think the real signal will come at the close of business today. I think that if we find ourselves falling, the longer-term downtrend should continue and we will most certainly test the 1.05 level. On the other hand, if we can break above the 1.10 level for any real significant amount of time, this market is probably going to continue to grind higher for the longer term. For myself, I’m actually going to stay out of the market until Monday morning. I believe that once we get the entire move on Friday, this will be one of those situations where we may be able to place a long-term trade. I realize I might be giving up a handle or two, but in the big scheme of things, that’s not much.
