Abnormal movements like the ones we have seen in the past couple of days are rarely classified as good because volatility, in general, is the equivalent of holding up a massive sign that says “Something Is Wrong”.
First, the figures: As I write, EUR/USD is up approximately 1.34% this week, which all things considered, isn't insane compared to past volatility. What is, of course, the bigger deal is Euro's ascent to get there over the past 2 days. Yesterday's range hit approximately 345 pips, as one level after another got taken out on one of the most aggressive buying campaigns we have seen in a while. Of all the items I read on this topic the last couple of days our always righteous friend over at zerohedge.com seemed to sum it up fairly well. I agree with him: nothing seems very “positive” about this move at all. One thing lead to another yesterday and there were a lot of “any reason” moves going on.
Definition of an “any reason” move: Traders look for any minuscule reason to keep price heading in one direction. Every little, tiny, most-of-the-time insignificant trendline get used as support and keep pushing on price. While most people aren't advocates of looking at smaller timeframes I say many times here that you mine as well if it's going to help. In the case of yesterday, smaller timeframes were all that seemed to be getting used.
Yesterday, I took a 1 minute trendline and watched it hit umpteen times without breaking until that 1.2480 area. I wrote briefly yesterday that 1.2500 was swarming with activity. This level hasn't been seen in quite some time and in addition to a slew of option strikes sitting upon it you have resting orders all over the place from traders of every walk of life. Hits on levels like this aren't fades, they're “be there or be square” and strong hands do the pushing.
What usually happens is you get a run on the level and some form of reciprocated fade, which it did, right back into that 1.2480 area I wrote about yesterday, the former resistance. The run beyond the level went to the 1.2540 area, which is good enough to take out stops, limits, and all other wondrous things sitting above the figure.
The fact that we sat on that 1.2480 level today and kept on pushing shows the business plan is in good effect. Adding to the pile is our friendly neighbors at the SNB whose exports linger on the edge of destruction by the freely floating currency. One thing is certain, that they own a whole bunch of Euros right now and share the mentality of Mel Gibson in Braveheart for not giving up. While they never comment on strong movements, that kind of volatility typically insinuates only certain things as they have made their policy clear in the past and the language hasn't changed. EUR/CHF is up about 300 pips from its low of appx. 1.3072.
EUR/USD has resistance ahead in the 1.2646, 1.2670, and 1.2740 areas. One step at a time, and we'll see where this goes. Look for use of local support for continuation and breaks of higher highs/higher lows for correction.