Fundamentally, the world has changed a lot since the Euro’s precipitous decline to recent lows. Political action means the Eurozone looks less likely to split apart, fiscal austerity will improve the debt/GDP situation at least in the short term (and therefore in the eyes of the market) and the Eurozone bank stress tests should give a further boost to confidence (presumably they will not be allowed to show too bad a picture). In addition, everybody seems to be bearish about the Euro on the grounds that it will have to go down for the sake of the PIIGS — which may be true eventually, but doesn’t have to be true this week. Finally, the continued rise of EURIBOR presumably makes the Eurozone an attractive place to park deposits.

Technically, the market has broken out above 1.25. Surprisingly, upside breakouts, of any duration and with a wide or tight stop, have been a good trading signal in this market. The recent rise can be put down to an increase in the proportion of down-days — volatility remains to the downside when it appears. For that reason it seemed sensible to wait for a re-test of 1.25 before entering — I didn’t want to be stopped out before the trade went my way (that has happened to me a lot in this market, albeit on the short side). The Euro is having a rally against other currencies as well — my average has just completed a double-bottom formation and broken above it.

Today the market moved down on high volume for the time of day on the news of a downgrade of Portugal and a bad ZEW survey. The wider macro picture quickly reasserted itself and the market rallied on high volume (and is still doing so). I took this as a chance to enter — entry point is shown by a blue arrow on the intraday chart. A stop at 1ATR gave a profit target this side of 1.30, which can only be a good thing. Stop loss page shows approx entry point, stop and profit target.

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