EURUSD Up After ECB / Trichet, Calm Ahead of NFP

Quote of the day: “When you have an efficient government, you have a dictatorship.” - Harry S Truman

EURUSD – 1.4348 @07:26 GMT

Good morning. Euro is back to Wednesday’s levels after the ECB raised interest rates to 1.5% as expected, signaled and further hike is likely and more importantly – suspended the collateral rules for Portugal, which means easier funding for Portugal as the Portuguese banks will not be cut off from central bank funds. The ongoing reversal doesn’t come as a surprise, since it was quite likely that the rate hike and Trichet’s speech would halt euro’s free-fall but the question is whether or not the euro will continue the recovery started yesterday. Frankly, it seems like a short-term pullback and I don’t feel confident about it. Technically, we now have a nice reversal candle on the daily charts suggesting a retest of 1.45 soon, but on the other hand we have all the concerns over the Eurozone situation which is fueling selling into rallies as seen in the last couple of weeks. But let’s not forget that the dollar is not in a better shape either, therefore we’re basically still comparing bad apples to bad oranges so let’s not claim that one of them is ripe. I for one remain bearish on EURUSD but more cautious than usual while yesterday’s long tail candle/pin bar suggests that a reversal is in place. Being a fan of such patterns, I am considering a small long position on the break above 1.4375, while being ready to switch side as soon as the market resumes the decline. My most recent position was a short at 1.4295 yesterday, which I closed at breakeven on euro’s recovery from 1.4220. Today is the NFP day – most important event in the economic calendar – so the market is likely to be calm until the US session kicks in.

Trading strategy: looking to buy a small size at 1.4380 with a stop at 1.4340 (0.3% risk), target at 1.4500. A break below 1.43 is what I look for to indicate a potential selling scenario.

Support: 1.4300/20 and 1.4280 and 1.4200
Resistance: 1.4370/80, 1.4400, 1.4430/65, 1.4500, 1.4550/75, 1.4600 and 1.4700
Market sentiment: long term – mixed, medium term – bullish, short term – bearish, intraday – bearish

have a great day and trade safe!

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Post tags: ECB, EURUSD, Interest Rate Decision, NFP, Portugal, Trichet, unemployment