FX land: EUR/USD

Since last week's break of $1.30 in EUR/USD I have warned a bounce is coming, it's typical of a major break of support and $1.30 was the line in the sand, with the LTRO coming, it was buy the news/sell the event. In yesterday's FX post  (click the link) I warned of a bear pennant in the EUR/USD. FX is a huge market, it was easily seen by traders and what happens to obvious technical patterns? They get head faked, over and over again.

Here's the story board.

From left to right, the red arrow is a 40 pip dip in the Euro, which happened at the same time the highly unusual and very scary 4 week US Treasury auction results were announced, which as you may remember, came in at a 0.00% yield,  (click link to yesterday's post). The operation was $30 billion in 4 week notes at 0.00% with a subscription of $270 billion (9x more buyers then notes available) which led us to some scary conclusions, big money feels safer parking their money at the U.S. Treasury earning 0% rather then in any bank and the scary part is this is only a 4 week note, so they apparently are very afraid to have money in the banking system over the next 4 weeks, so much so that they will take 0% return on $30 billion dollars. Shortly after a 5 year was auctioned off at a measly .88%.  In the red box I pointed out the bear pennant, it broke out in a head fake move to the upside (green arrow) as we would expect (it happens 80% of the time) and then failed as usually happens. At the yellow arrow we have the initial reaction to the LTRO and at the orange arrow we have the second thought reaction as 10 year BTPs continued leaking wider.

Remember yesterday I warned the Euro was not holding up well in yesterday's bounce (click the link). We also saw signs in the market as well as financials as well.

Euro $1.30 is probably back in the target zone, a break there will not be pretty for equities, but we still have a lot of volatility in year end window dressing right up to the 27th when trades need to be made, after that they won't count for the quarter because of the T+3 settlement rule.

I still am of the mind to fade any strength in the market through the end of the year.

Intraday updates coming up next.