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The EUR/USD pair fell during the Thursday session, but found a bid again late in the day as traders weren’t ready to take on a lot of risk in one direction or another before the EU meetings. Because of this, we ended up with a doji for the day showing that the market is still fairly indecisive. There were rumors at the end of the day that got the more dramatic out there covering their short positions as Angela Merkel was said to have canceled a conference call. With this being the case, a lot of traders speculated that the ECB was going to step in and do something. Needless to say, this is very reckless speculation as from running the unknown news is a quick way to lose money.
The 1.25 area continues to be a focal point in this market, and as such it is going to be difficult to move much before the end of the summit. The bearish flag that broke down a week ago still suggest that we are going to eventually hit 1.15 or so. The 1.25 level continues to be resistive, and as such we feel that selling rallies in the Euro is probably the way to go.
Until the bottom line of the flag gets violated to the upside, we still feel the technically this looks like a very weak currency pair. Also, one would have to think that even with a set of solutions this week, there is still going to be quite a bit of work to do. The ECB has now been slated to possibly cut rates in the next week or so, and this of course will weigh on the Euro as well.
We would sell rallies on short-term charts, especially the closer it gets to 1.25 or so. Above that, 1.26 should also be very resistive, and we feel that this market will still continue to be very short-term focused as there is absolutely no conviction with many of the traders involved. Unfortunately, it looks like from the articles that we've been reading lately high-frequency trading has come to the Forex markets. Obviously, the Euro is one of the first markets that they would run to.