6th June, EUR/USD preview

Welcome back,
I hope you have enjoyed a good break now lets back to making some pips.

Context
 More bad news for the Euro yesterday as the Spanish explained the high cost of borrowing was forcing them out of the credit markets. One official even went as far as to say a rescue of Spain was now technically impossible.  As covered recently this seems the only possible outcome from when the EU negotiated a massive debt write off in the last bail out of Greece. If the EU is going to negotiate debt write offs for one country, who will lend other at risk countries money? Less lenders equals higher rates…. This issue is going to be around for a while and I note Cyprus have started to talk about issues in its banking industry.

Yesterday's Report 
Yesterday after an initial rally we saw a sharp selloff in the market on news from Spain, but latter in the day the market rallied again. I note with interest the daily pivot today rose, so the high, low and close yesterday was higher than the day before despite the selloff.
Technical Analysis
Our pivots are out of line with the daily pivot above the weekly but below the monthly. This of course reflects the shorter term Rally after a longer sell off. The rally will have included short covering, and its peak of 1.2539 is our key number now. If this number remains the lower high on the charts the rally has reversed around the 23.6 Fibonacci level. A retracement as shallow as this would tell us the big guys didn’t cover their shorts and the momentum is firmly down with the low of this move 1.2288 likely to be tested in coming days.
If price should push up and take out the 1.2539 level then for now the rally continues and may push up towards the 1.2600 resistance level.

The Day Ahead –
Price is currently testing our trend-line and I will be looking for a reversal here and a break of nearby the support level of 1.2492. I would then need to see a retracement to give me a lower high, and I would be looking for a price action entry and a trade down to DP and possibly beyond. Note this would mean I am trading the second leg of the move.  This is my preferred option.

On the long side I will be waiting for break of the trend-line, a retest of the support level and then a target of the recent high. The correct price pattern can get me in long again at that level.

News Today GMT
12:45pm  EUR Minimum Bid Rate 1.00% 1.00%
1:30pm EUR           ECB Press Conference

Congratulations to Davide and Geoff who last week made there 1000th pip on the EUR/USD for the year, and all that with losses for the year of well under 100 pips. Great work guys...


All the best
PLB