Yesterday we said we were growing bullish on the euro. It rallied nearly 100 pips today, so we’re feeling pretty good about that. We like the long EUR/USD position more than ever.
The headwinds for the euro should subside for some time on the fundamental side. The budget cuts look good and the ECB and IMF are supporting Greece. The cuts may never be fully implemented but Greece’s government has gained some credibility for now.
Remember that the market is heavily positioned against the euro. Shorts need to cover and this move higher is going to start to shake them out.
We outlined 1.40 and 1.42 as our targets. Here you can see where some of the initial resistance comes in. 1.3788 is the first target followed by 1.3839. There will be lots of sell orders clustered at those levels. After that, we expect smooth sailing.
