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Today’s Trading Edge: EUR/USD –Euro collapse continues after runaway gap

Posted by Edward Moya on Jan 5, 2015 8:03:00 AM

WWM EURUSD JAN 5 2015

EUR/USD continues to sink as fears grow that Greece may leave the euro.  Price action on the 30 minute chart displays a runaway gap that shows a continuation of the downward move with price blowing right by the 1.20 psychological handle and making a new 9-year low at 1.1862. 

Last week’s euro post highlighted the recent weakness to be stemmed from the increased likelihood that the ECB will launch a large-scale quantitative easing program this month.  Another bearish driver was the IMF COFER that announced that euro global reserves1 had a record plunge of 1.5% to 22.6%.  With no stabilization flows coming in, not much can slow this nosedive move with the exception of a terrible US employment report this Friday.  

The news that some German officials are open to the idea of Greece leaving the monetary union could drive the exchange rate to 1.15 sooner than later.  Deeper support may come from the 1.10 handle, followed by 1.0834, which is the 161.8% Fibonacci expansion level of the 1.2041 to 1.3992 move.  Any bullish bounces around 150 pips might provide optimal entry prices for short entries. 

The trade: Sell EURUSD at 1.1930 with a stop loss at 1.1980 and a take profit at 1.1730.  The Risk/Reward Ratio is 1: 4

Edward J. Moya        

Technical Strategist

WorldWideMarkets Online Trading

Topics: EURUSD, German Economic Data, NFP, euro. euro/dollar. U.D. dollar

 

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