EUR/USD fell again on Wednesday as the FX community continues to shun the EU and the “solutions” that the region keeps coming up with. The 1.30 level has been broken, but the candle for the session looks slightly supportive, suggesting that we could see a bounce from this obviously important support level. The rallies in this pair should continue to offer selling set ups, and as a result – we are willing to sell them in the future. We won’t buy this pair with the myriad of problems coming out of the EU presently.
The 1.30 level goes back quite some time in history as a significant support and resistance zone, so a move from here wouldn’t be much of a surprise to be honest. The Euro should continue to be plagued by the debt issues, and even if that series of seemingly impossible problems get resolved – there is still the issue of the region going into recession in the near future. Adding to this problem is the fact that the ECB should continue to cut rates, and you have absolutely no real reason to own the Euro now.
The bounce that could be coming should be sold into, especially if we see weakness near the 1.32 level which was previous support. The breakdown over the last three days should offer some kind of pullback, and it is this pullback that we think will have more people stepping in to sell this pair off.
The Dollar is the currency that everyone wants to own at the moment, and as long as that is the case, there will be no real reason to sell it against anything – let alone the epicenter of all of the problems like the Euro. The crisis is likely to continue into the New Year, and as a result we think this pair should start trending fairly nicely. If we can get a break below the 1.29 level, we believe the 1.25 level will be the next serious support level. We cannot imagine buying this pair unless it closes on a daily chart above the 1.35 level.
Written by FX Empire