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The EUR/USD pair bounced off of the 1.25 handle on Tuesday as the bullish run continues. However, we aren't comfortable going long of the Euro at this point in time as there is a lot of resistance overhead. It really isn't a matter of trying to figure out whether or not it can go higher; rather that each should run into quite a bit of noise over the next 150 pips.
We still prefer the Euro to the downside overall, but don't see any signs from which to sell at this point. We think that the market is essentially waiting on the Friday speech from Federal Reserve Chairman Ben Bernanke at the Jackson Hole, Wyoming central bankers meeting. There is a quite a bit of speculation in the marketplace that quantitative easing will either be announced, or suggest that during this speech. This sets up the market for a serious chance at this point.
Looking at the area that we are in right now, it really wouldn't take much in order for the sellers to take control again as there is so much noise over the next handle or two. The lows from the session on Tuesday would in fact be an area that we would consider selling from if we can get a daily close under that price. Currently, we still think that a bit of wishful thinking is in the marketplace and that at last the Chairman gives the market everything it wants, the "riskier" currencies will suffer. This of course would include the Euro.
The candle for the Tuesday session does look fairly strong but again, we think that the noise above will continue to be a bit of a hindrance, and as such it should be a bit of a slow grind higher and not a clean or smooth move.
Looking forward, if we can get above the 1.27 level we would have to admit that the trend is almost certainly changing, and of course go long. Until that happens though, we are not comfortable buying the Euro overall, and would continue to look for selling opportunities.