We are going to take a look at the euro against the U.S. dollar today. The euro rebounded from early risk-driven losses to close higher on Thursday. The move sets up a bullish hammer pattern as the USD is beginning to look weak on multiple fronts.
It seems everyone is jumping into the fray and picking a bottom in EUR/USD but we think it’s time to take a look at the long side. We have been consistently bearish on the euro for a long time and have been right. We have been neutral for sometime now and despite the structural headwinds that face the eurozone, we think tactical longs are in order.
We can see that the pair has been stuck in a clear downward channel but the last few days have shown signs of a bottoming formation. Today we had the opportunity for deeper gains but EUR/USD found support above the earlier lows and traced out a hammer formation. On the upside, we will be looking for a rebound to 1.40 or even 1.42. We think this move could happen quickly as shorts are covered.
We have a firm stop at Thursday’s low.