It seems like everybody is talking about shorting the Euro this week. From Forex blogs to Forex 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 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.
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