By FXEmpire.com
The EUR/USD pair rallied on Friday as more dreams of sugar-laden stimulus crept into the markets. The pair has seen quite a bounce lately, and the upcoming Greek elections are now squarely in the markets sights. With this election, the entire fate of the Euro hangs in the balance it seems if you listen to the news reports.
However, there are reports that the pro-austerity party is slightly ahead in the polls, and there is a real chance that they take the election. If so, this pair will gap up on Monday as the “risk on” trade and a relief rally will happen. If they don’t, a gap down could form, but the central banks around the world have already mentioned that they are ready to get involved in the markets if there is another credit crunch, and will be providing liquidity.
In this type of environment, there is a real chance that either election result will be pro-Euro, as the one result looks like a referendum for the Greeks to sit put, the other one gets what the bulls love – stimulus. However, the pop in this pair will be somewhat short-lived in our opinion as there are many other issues in Europe at the moment.
Spain and Italy have gone nowhere, and it will be interesting to see what the Federal Reserve does this week at its meeting. There is the chance that they do nothing, and this will more than likely be the catalyst for this pair to fall again. None the less though, the potential for a significant rally is definitely there.
The action towards the end of the session saw more and more Euros being bought, and it now looks as if the market is “leaning” to the upside. With this in mind, there will be a lot of people rushing to get long of this pair if it starts moving to the upside. As for selling this pair, we firmly believe in selling Euros overall, but this game looks rigged already, and to think that it will be easy for it to fall for any significant amount of time on Monday is probably a bit Pollyanna-like.
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Originally posted here
