The EUR/USD has reached the swing short zone
The U.S. dollar’s pullback has broken below the 81.00 level and this has allowed the euro gain against it in a second day of strength for the single currency. The question is how long will the bears hold on amidst the rally from 1.2625 and does today’s break of the 20 period SMA close mean that the bears may be gaining longer-term control.
The daily EUR/USD has rallied to the swing short zone that is between the 20 period SMA close (aggressive) and the 34 period EMA low (conservative) all while traders ponder what the odds are that the IMF will get an additional $500 billion to begin lending out (the U.S. has opted out) and whether the bulls have enough momentum behind the stream of positive headlines to make a run at 1.3000. A break of the major psychological level would no doubt make for a significant short squeeze all while emboldening the bulls to carry the pair higher. For now however prices are sitting just above the 20 period SMA close. This level is the initial short entry for the trend-following swing short.
My issue is not the weakness in the euro but rather the strength in the dollar. The greenback has struggled as of late despite holding onto the uptrend on the daily timeframe. The congestion that preceded the pullback shows that while there is support, the bullish momentum that has catapulted the U.S. Dollar Index to higher highs has been missing.
Near-term it will be important to EUR/USD bears that the highs from January 13 hold as resistance. This makes the battleground between 1.2877 and 1.2867. A break of this ten-point range could push the pair towards the 1.3000 level.
Past performance is not indicative of future results
The daily EUR/USD has triggered an aggressive swing short as the pair has rallied to the 20 period SMA close. This push higher should be met with selling pressure at 1.2877 and the 34 period EMA low currently at 1.2898 - just in front of the 1.2900 level which is a major “00” psychological level.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
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