The euro remains steady as market participants anticipate that a deal will be reached for Greece to receive an extension. With the EU Finance Minister meeting just hours away, the euro could finally break out of its tight consolidation range of 1.1269 and 1.1358. If no new accord is made or extension is provided for Greece, we could quickly see the euro break below the 1.10 handle.
The bearish trend has the euro roughly 6% lower over the past year and almost 15% for the last two years. Since the ECB announced an expanded asset purchase program on January 22nd, the euro’s initial drop from 1.1615 to 1.1096 appears to have stabilized comfortably towards the 1.13 zone. While the fundamental reasons for a weaker euro remain valid, we could see a short squeeze here support a move higher by a couple of figures.
Price action on EUR/USD daily chart shows where we may see a potential bearish ABCD pattern. If the euro has a relief rally from the Greek outcome, the 1.16 region may provide strong resistance. If the bearish pattern is valid, we could see a strong reversal occur around the 1.1550 region and see an ultimate test of the 1.10 handle. Longer-term support will come from 1.0834 level, which is the 161.8% Fibonacci expansion level of the 2012 low to 2014 high move.
The trade: Sell EURUSD at 1.1550 with a stop loss at 1.1650 and a take profit at 1.1250. The Risk/Reward Ratio is 1: 3
Edward J. Moya
WorldWideMarkets Online Trading