EUR/USD Heading To Crucial Supports For The Long-Term Sentiment
Admirals | Jan 23, 2013 06:49AM ET
As we expected, volatility on EUR/USD increased significantly when American traders came back after a long weekend. The morning was great for buyers as they managed to hit 1.3370. What happened next is hard to explain: EUR/USD experienced a heavy 100 pips drop as a result of some rumors about the European bank sector.
As it often is with rumors, their effects are temporary and they mostly kill traders’ stop loss orders and come back to the previous levels. That was what happened yesterday. Traders managed to come back above all previous supports that were broken by that significant drop. The chart shows that it was a great effort for bulls and in the end they were too tired to set new highs. That fact caused another major dropdown aiming for the 1.3275-80 support.
This level was quickly rejected again, showing us that it is a very strong level and breaking it can generate a major sell signal on this pair. What is worth noticing is the fact that traders still respect the recent pennant upper line (red), which was a strong resistance at the end of the European session yesterday.
The morning started with traders aiming at the 1.3275 support again. With such a weakness from the buyers’ side we can expect that this level will be finally broken. This may cause a drop to another major support located slightly below 1.3250. This level is a last chance to keep a positive sentiment on this pair and can be used to open low risk/reward ratio long positions.
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