The EUR/USD pair fell hard on Thursday as the markets worried about immanent downgrades of the world’s largest banks by Moody’s, and weak economic numbers from both China and Germany. The situation in Europe is causing a lot of concerns as well, and this of course weighs upon the Euro itself as the currency is at the center of so many issues currently.
The stock markets fell apart, and the Dollar gained against almost everything. The safety trade came back, and the Euro is simply too risky to own as the next dip or fall is simply a bad headline away from happening. The European Union just seems far away from some kind of real solution, and this hurts the confidence in the Euro overall.
The market has been bearish over the last few months, and this recent pullback is just that – a pullback in our opinion. There are simply far too many reasons to at least not own the Euro, if not flat out shorting it. The market has been very lenient with the Europeans for far too long, and it seems that the Forex markets have finally gotten around to showing the politicians in Europe that there is only so long you can take to make the adult decisions that are needed.
The bearish flag that we have seen recently looks like it is giving up as support, and this should send this pair much, much lower. Because of this we think that the next major leg is about to start for the sellers. The breaking of the daily candle to the downside has us selling aggressively, and perhaps adding every handle or so as we fall.
The market obviously cannot be bought at this point. There are far too many disappointments in Europe every time the market tries to show some kind of confidence in the Euro. Because of this, we have only been selling for some time now, and it looks like a break of the 1.25 level is about to happen. If that does in fact come – we think the next 500 pips or so are down. We are also selling rallies if they come.
Written by FX Empire