EURUSD opens higher after last week’s 5.1% advance

Mon, Mar 23, 2009

The Forex market opened on Monday continuing the anti-dollar momentum it started last week.
Although EURUSD did find the time to retrace to lower levels on Friday, many traders saw it as a prefect chance to jump aboard and short the dollar, pushing the pair back above 1.36. this morning

If you are long EURUSD, and want to keep your position open, the key factor to pay attention to right know would be the market’s momentum. Since historically, when sizable moves lose their momentum, it can be regarded as the earliest sign of a possible deep correction.

Personally, I would consider EURUSD advancing to its next resistance level 1.3815 in a day or two as a sign that upwards momentum still exists, and therefore, will maintain my long EURUSD position.
Any other market behavior would make me reconsider my longs.

This week’sÂ events might still shift the tide, and if only temporarily, let us not forget the dollar was and still is – a safe haven currency in this time of crisis.Â Extraordinary bad news could yet trigger a run back to Dollar and Yen.

Another factor we should take into account is “profit taking“. All these smart traders who entered around 1.3 EURUSD are looking forward to withdraw their positions and protect their profits at some point . Right now they are trying to figure out whether they should close their positions immediately or continue and ride the momentum until 1.4 or even higher. If the market will supply them with a reason to fear for their open trade profits, they will start a chain reaction of dollar buying. Such a chain reaction will be most likely to occur under 1.3550 and might trigger a sell-off back to 1.34 this week.

Today’s market focus is on U.S Treasury Secretary Geithner speech at 12:45 GMT and later the U.S Existing Home Sales report due at 14:00 GMT with forecasted 4.45 million buildings that were sold during the previous month.