Price action on EUR/USD jumped lower last night after Greeks woke up to find out their banks will be closed for six days. This shutdown of banks and imposing capital controls aims at limiting withdrawals until the day after the referendum vote which will determine if the Greeks will accept terms to restore bailout aid.
Despite temporarily falling below the 1.10 handle, the euro has stabilized for a plethora of reasons. Profit taking, hopes for Greeks to vote yes on July 5th, and the Swiss National Bank intervened in the forex markets.
Price action on the EUR/USD 60-minute chart shows that the opening gap has been filled. The recovery however may not last and we could see price fall if we also improving US data. The Greece debt saga could keep this currency pair heavy. To the downside, major support may come the 1.07 handle. If Greece leaves the euro, a selloff could target the 1.0450. To the upside, intial resistance will come from the 50-day SMA at 1.1150. The 1.15 zone will provide major resistance.
The trade: Sell EUR/USD at 1.1125, with a stop loss at 1.1175 and take profit at 1.10975. The risk/reward ratio is 1:3
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading