EUR/USD: Overall bearish but still susceptible to short-covering bounces
It’s very hard to be long either EUR or USD with any great conviction making this pair pretty hard to trade at times. The price action since the announcement of ‘infinite’ Fed QE would suggest it was a case of buy-the-rumour-sell-the-fact and there looks to be a technical top forming now below 1.3080. That said, recent history shows us that this pair is extremely susceptible to sharp short-covering bounces so we can expect the unexpected and work extra hard to find the right entry levels. Another interesting point is the extremely bullish stance of many of the big banks, who feel 1.35+ is eminently achievable; they’re not always right but they are worth listening to.
I sold last Friday’s rally above 1.3025 and have already booked 50% of profits near 1.2940. Overall I’m bearish but I prefer my AUD/USD and cable shorts, so I’m likely to cover the balance on another bounce out of 1.2880. In fact I might even consider taking a long position intraday as a hedge against my other short positions, but as always let’s see how it develops.