We’re still within consolidation when you look at the higher time frames such as the daily chart seen below.

With the news hitting the wires after the close of London that Berlusconi will finally succumb to the political pressure and resign, the Euro was inspired to jump 40 pips. However, even with his resignation though the fundamentals may see a slight improvement, it’s really nothing more than a glimmer of hope. In reality, fundamentally and technically on the charts nothing has changed.

There remains a huge burden in Europe to fix all that remains unstable. In fact, one could argue that all these changes in government, Greece and now Italy, will require even more time to elapse before they can fully implement the bailout plan that’s been talked about.

There remains an opportunity to look for peaks and valleys within this defined range to trade if you narrow your focus to the shorter timeframe charts. The key to trading in this environment is patience and discipline. When you enter a trade make sure your profit targets are aggressive. Until we see a breakout to one side or another of this range, it is unreasonable to think you’re going to hit a home run trading the Eurodollar.

FaholoFX remains bearish in bias, as we’ve reiterated in this article, regardless of the resignation of Berlusconi, the fundamentals in Europe haven’t changed. It’s still a mess and there is a likelihood of further contagion spreading across the Euro Zone.

Disclaimer:  At the time of this writing at least one principal at FaholoFX.com is holding a short position EURUSD.

Doug Craigmile – FaholoFX

The EURUSD had a very bullish October after finding a low at 1.3145 on October 4th it found surprising strength amidst the turmoil of the discussions of the bailout that was finally outlined this past Wednesday. After the initial excitement immediately following the news of a Greek bond haircut in Thursday’s trading, price ran straight into what could prove to be some solid resistance. Let’s look at some charts.

Starting here with the weekly chart we can see that EURUSD had come back to test the underside of a previously broken bullish channel. This is not unusual and can often provide a great opportunity for bears to re-enter at a great price. Another school of thought says that there is a massive supply zone seen in the box on the chart. A massive area of consolidation, previously, that the bears broke out of in early September.

Now let’s look at a daily chart. Adding to my bearish bias for the week, we can see that as the global markets digested the Euro-Zone news, we saw some pause during Fridays trading, with a small bearish daily candle. Friday opened at 1.4197 and was did not see any buyers through the day as that turned out to also be the high. We then saw it traded, albeit lightly, down to 1.4132 and a close of 1.4156. I find significance in these numbers because as strong as the Euro was on Thursday, the massive 1.42 psychological barrier held as we closed below. My last bullet on the daily chart that adds to my bearish bias coming into the week is the 78.6% retracement level. This retracement is from the high of 1.4548 (August 29, 2011) to the low 1.3145 (October 5, 2011).

Keep in mind while trading this week, that on Thursday, November 3, the ECB will be issuing their minimum bid rate or interest rate. UBS has speculated that the ECB is likely to announce a 50 basis point cut, while other economists are spread out at 0 through –.25.

So while we are bearish on this pair for the multitude of reasons stated above, there will be continued volatility in trading this pair as news and rumors come out of the EZ. To state it simply, we feel the better and safer trades will be to the short side on this pair.

Tuesday’s trading in the Eurodollar was a mixed bag that saw our earlier post of bearishness come to fruition in early trading as the Euro dropped seeing a low during London trading to a low of 1.3651. Buyers stepped in there to give the pair a boost and were further propelled by a false rumor that the EU bailout could see some 2 trillion in funding.