The EUR/USD pair continued to show weakness on Friday as the sellers have this pair firmly under control. The resulting shape of the candle is the second shooting star in an a row at these low levels, and it looks as if the market is pressing the 1.25 level with serious pressure now.
The 1.25 level is a large round number, so there is always going to be some kind of interest by traders at this point, and support should be expected. In fact, there are many stories that Asian central banks are trying to defend the Euro at this level as the central banks have all diversified their holdings. As this market falls, there is a real chance that the banks are losing cash rapidly. It should be noted that the 1.30 level was a similar situation as well.
The Euro is suffering at the hands of inept politicians that simply cannot decide on what to do. In fact, the recent problems can be attributed to a major underlying problem: One currency for several countries that have completely different economies. The differences between countries like Greece and Finland are wide, and as a result the fiscal situation will be completely different as well.
The candles have us pretty much positive that this pair will break down. The 1.25 level will have to give way though, and in order to feel “safe” shorting this pair, we need to see a daily close below that level. If this pair rallies, we aren’t willing to buy at this point. Even though the breaking of the top of a shooting star is massively bullish, we believe that the situation in Europe is too far gone for the mean time, and as a result any rallies will more than likely be short-lived. In fact, we like the idea of fading them on signs of weakness as the headline risks coming out of Europe are simply too numerous to list. In fact, we aren’t willing to buy until we see a post-1.30 daily close in this market as it would show a serious momentum shift.
Written by FX Empire