It seems like everybody is talking about shorting the Euro this week. From blogs to forums, the buzz is that EUR/USD is going down for the long haul.
So, should you short the Euro this week?
There are economic and technical reasons to short the Euro. If I had to pick a direction I would say EUR/USD is going down. However, I will not be selling as there is no clear signal on my charts.
But this is not about me. Who cares if I am going short, the question is should you short the Euro this week?
I cannot tell you if you should sell but I can show you why selling too early might be dangerous. Many people are saying that EUR/USD has broken support but EUR/USD is still stuck on support.
The weekly EUR/USD chart above shows a large reversal from the 1.2850-1.2900 support area in January 2011. It also shows a three week struggle by the Bears to break the 1.2850-1.2900 support area in December 2012. During the three week week struggle the price reversed almost 200 pips after touching the support area.
The 1.2850-1.2900 area has a long history of causing massive reversals in price. In fact ever since the inception of the Euro this area has been causing trouble.The weekly EUR/USD chart below goes back to 2008 and shows the 1.2850-1.2900 area acting as both support and resistance.
Why are people saying that support on EUR/USD is already broken? Support is far from broken and selling EUR/USD right now (2012-05-14 6:00 GMT) is far from safe.
Do not get me wrong, I am not saying that EUR/USD will not fall. I already said that if I were forced to pick, long or short, I would short.
The point I am trying to make is that EUR/USD is fighting a significant area of support right now. Selling into support is very dangerous, you don’t sell into a group of buyers.
If you want to sell EUR/USD my advice is to wait for support to break.
I will leave you with one final thought. It is a well known fact that most amateur traders fail. Forex mega robot ( http://www.forextradeformula.com/ ) forums and blogs are full of amateurs. Do not enter a trade because everybody else is doing it. Do your own analysis, do your own research and think before you trade.
Like this post? Hate it? Want to share your opinion? Comment below!