• The euro initially spiked during the trading session on Monday, but it looks like the 0.8650 level will continue to be major resistance, as it has been multiple times in the past.
• Ultimately, this is a pair that tends to be very noisy, and the recent shot straight up in the air is very unusual.
• With that being said, the market is likely to continue to look at this as a potential shorting opportunity, as we continue to see a lot of wicks to the upside, and we just can’t seem to hang on to the gains.

(Click on image to enlarge)

Technical Analysis

Analysis for this pair is obviously very bullish from the last couple of weeks, but when you look out at the longer-term charts, it makes a lot of sense that we could failure, because it’s an area that’s been important multiple times. In fact, I can see reactions to this level multiple times over the last several years, and that does suggest that perhaps a bit of a pullback is coming. If we do in fact fall from here, then I would anticipate buyers to come back into the picture near the 0.8520 level.

On the other hand, if we turn around and rally at this point, breaking above the 0.8750 level could very well turn this market into a runaway market on the upside. I find that a little bit difficult to swallow, but I suppose it’s possible. If that were to happen, then I think you would see the British pound suffer against most currencies, and the Euro just simply runaway against currencies at the same time. All things being equal though, the euro is overbought, and I think a pullback makes more sense than not.

All things being equal, this is a market that doesn’t typically move this quickly, and I think that in and of itself could have ramifications as to where we are going. Ultimately, this is a shorting opportunity that has a low risk to reward, mainly due to the fact that it would take so little to stop you out if you put your stop loss just above the 0.8650 area, perhaps by 20 pips or so. The downside could be the 0.8520 level rather quickly, maybe even the 0.85 level without changing the trend at all.

More By This Author: