EUR/USD was aggressively sold and broke past critical uptrend support that has been in place since July 9th and a key price barrier at 1.3400 after the ECB surprised markets by cutting its benchmark interest rate to 0.25% from 0.50%.
The violent selloff confirms the end of the bullish trend and opens the door for further downside towards the 1.3250 level. Any breakdown below 1.3250 should find further support near the psychological 1.3000 level.
The daily chart above highlights the disruption of the correct order of moving averages, which in a strong bullish trend has daily candles trading above the 50-day simple moving average (SMA), 100-day SMA below and the 200-day SMA.
The trade: Go short EURUSD at current price (1.3320), with a stop loss at 1.3350, and a take profit at 1.3260. The Risk/Reward Ratio is 1:2.
Edward J. Moya
WorldWideMarkets Online Trading