By: DailyForex.com
EUR/USD fell during the Friday session after initially trying to rally. This was an interesting candle as it formed after two consecutive hammers, and as such it looks like we have a real dogfight on our hands.
The pool hammers should show significant amounts of support, and the cluster at the 1.2750 area should also offer support. Because of this, I think that the downside in the Euro is somewhat limited, but necessary.
The market needs to pullback on some of the bullishness we've seen recently, and this move would accommodate some of that necessity. If we do manage to break down below that level, I also see the 1.25 level was massively supportive.
Spain, Greece, and so much more
I am personally very bearish of the Euro overall. However, I do recognize the fact that the market is willing to overlook a lot, and as such we could continue to see bullishness all the way up to the 1.35 level before it's all said and done. The real question isn't whether or not the Euro deserves to go higher, but rather whether or not the market is willing to send it there. As things stand right now, it does look like the markets are more than willing to support the Euro.
I see this essentially as the "the world isn't coming to an end" trade. In other words, the Euro had been shorted so much that some of this is a simple unwind of the oversold conditions. Granted, there are some values to be found in Europe in general, but the truth is that the EU is going into a fairly significant recession. Because of this, the ECB will continue to try and work against the value of the Euro, and the pair will be a fight between two central banks trying to kill their own currencies.
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Nonetheless, I think we will see another leg up in this pair, followed by a nasty selloff. For the next couple of weeks, I am looking for supportive candles in order to buy this pair as sentiment dictates.