Today, the EUR/USD daily chart displays a significant reversal that is currently testing the 50-day Simple Moving Average (SMA). Earlier this week price action respected the 1.3700 handle and has opened the door to fresh selling interest which was triggered by both a solid Empire State reading which highlighted new orders hitting a 2-year high and an overall risk-on market as the S&P 500 hit a new record high.
Future economic data is likely to continue improve in the U.S. and provide Europe with more deflationary problems. The fundamental take might finally help support a key move to test the 200-day SMA which is currently trading at 1.3335. As we continue to see multiple key support levels taken out, momentum investors may help expedite the downfall in the euro.
If key downside target of 1.3462 is reached, a bullish ABCD may form at this area and provided a major profit-taking bounce higher before strong selling interests resume and possibly target major support that resides at the 1.3250 pivot level.
The trade: Sell EUR/USD at 1.3540, with a stop loss at 1.3575 and a take profit at 1.3470. The Risk/Reward Ratio is 1: 2
Edward J. Moya
WorldWideMarkets Online Trading