Profit taking did not occur on the last day of the quarter and the recent slide for the U.S. dollar has accelerated. Ten year U.S. Treasury yields have fallen from 2.655% to 2.52% over the past two weeks. Without better U.S. statistical readings, the pressure may continue on the greenback. Despite an easing ECB and poor European data points, the euro has mounted a strong recovery. The bearish trend that was in place after the key respect of 1.40 level and the key trendline break displayed in red, price has respected 1.3501 and mounted a substantial recovery.
EUR/USD (daily chart) is currently trading at a 6 week high and price is respecting the 38.2% Fibonacci retracement of the May high to June low move. In addition to that key level, price is testing the 50-day SMA and is also tentatively forming a bearish Butterfly pattern. A pullback may occur over the next couple of trading sessions, but the key for the euro may in fact occur on Thursday after many key options expire at 10 am(EST). After Thursday’s trading session, if the EURUSD is able to stay above 1.3650, further upside may take this pair towards 1.3737. For now, the euro may have a slight pullback but buyers may be waiting around to the 1.3550 area.
The trade: Sell EURUSD at 1.3690 with a stop loss at 1.3730 and a take profit at 1.3610. The Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading