As we approach the end of the trading week and month, EUR/USD bounced from the lows. It rallied two big figures yesterday (i.e., 200 hundred pips), without any particular reason.
Sure enough, stocks in the US bounced. It was enough for risk to rally, but the EUR/USD’s rally exceeded the one of its peers.
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Naturally, contrarian traders cannot help but wonder if a bottom is in place. From a fundamental perspective, you can read here about three reasons why the euro, and the EUR/USD in particular, may rally.
How about the technical one?
What is obvious is obviously wrong
There is a saying in the trading world, as per Stanley Druckenmiller, the famed investor – what is obvious is obviously wrong.
He wants to say that what is obvious in the markets is something that everyone already knows. Therefore, it should already be priced in an efficient market.
As such, the trader’s job is to identify unusual patterns if the trader has a technical approach. Or to think of fundamental aspects that may change the market way ahead of others.
How many times have we heard that the euro is doomed to fail during the 2008-2009 financial crisis? Yet, here it is.
So what if this time is the same? After all, everyone is chanting the euro’s failure again, given all Europe’s risks and geopolitical events.
Sure enough, it only bounced about a hundred pips from the lows, based on the current levels. After dropping like a rock from above 1.20, the current bounce is nothing but a drop in the ocean.
But the technical picture looks encouraging. Buying here is risky, but traders should focus on the parity level. A move above parity suggests that a triangular pattern ended. By the time the market breaks the b-d trendline, the bottom should be in place.
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