With the European Union seemingly getting closer to a general agreement, there is a real chance that the Euro could continue to gain on the US dollar for some amount of time. There is a lot of resistance between 1.30 and 1.35, and as such we think that the move higher is going to struggle. It doesn’t mean that this market will be able to continue higher, just that moves will be short and sweet.
The Federal Reserve on the other hand is willing to print as much money as it takes to turn around the economy. In other words, it is currently involved in “unlimited” quantitative easing and as such this should continue to devalue the US dollar. The real question is whether or not the Europeans come up with another headline that punishes Euro on the whole. There are plenty of headline risks out of Europe still, and as such we will continue to see a rally movement in this pair. In fact, it would not surprise us if the EUR/USD pair becomes one of the more difficult wants to trade for several years. This was once the “easiest” pair to trade for beginning traders, but those days are long gone now. We are willing to take trades in this pair in both directions, but will limit trading to very short-term trades involving 50 pips at a time or so.
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