The bias for the euro remains extremely bearish. Today’s events were perfectly queued up by the ECB and the market reaction to the rate cuts and ABS announcement drove EURUSD down below the critical support 1.30 handle to 1.2920. The biggest decline since October 2011, may see further weakness if with continue to see stellar data with tomorrow’s NFP number.
My bearish bias has been firmly in place for the majority of the summer and with the fundamentals screaming for further dollar strength on the improving US economy and a weaker euro on terrible economic data, falling inflation and the Ukraine situation.
Price is now currently trading excessively below the 200-, 100-, and 50-weekly Simple Moving Averages (SMA). The next key downward support level of 1.2765 comes from the 61.8% Fibonacci retracement of the 1.2041 to 1.3992 move. Deeper support may target the 1.2429 level followed by the 200-monthly SMA at 1.2210.
To the upside, 1.3050 will be key resistance and any rally should be faded unless we see a major shift back towards dovish behavior from the Fed.
The trade: Sell EURUSD at 1.2950 with a stop loss at 1.3050 and a take profit at 1.2765. The Risk/Reward Ratio is almost 1:2
Edward J. Moya
WorldWideMarkets Online Trading