By Kathryn James
While the markets seem to wait with trepidation to the potentially chaotic result of the Greek vote over the weekend, the EUR/USD has staged a nice comeback after a steady flow of news from Europe has turned the currency pair around and created a bounce from the 1.2287 low seen at the beginning of June.
The pair is currently trading at 1.2624 and the bullish case is that it has finally broken out of the downtrend channel to rally from the lows and with the extreme bearish sentiment of recent months in the Euro itself, this bounce does have the potential to squeeze out a few more shorts and run all the way back to knock the support break of 1.3000, which now acts as significant resistance.
For the bearish case, the wave of optimism from the lows has created a flag pattern, which gently slopes upwards against the trend. The flag is a continuation of trend pattern, so should the price breakdown from the short-term reversal then the measured target is much lower. The EUR/USD price has also encountered resistance around 1.2625, which is the low reaction from January and it failed to hold that level today.
Technical analysis is never definitive and is certainly no ‘Holy Grail’ and any form of analysis cannot forecast unforeseeable events, so traders taking positions in either direction ahead of the weekend news should use stops, discipline, maintain tight money management and expect the unexpected and for volatility to continue. Personally, I think we eventually go lower but I’m sitting this one out as I believe less risky opportunities lie ahead, as we sit at this crossroads and the result of the Greek election certainly won’t put an end to all the world’s financial woes.
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