The EUR/USD pair fell on Friday as the Non-Farm Payroll report showed that American jobs continue to be added. This could be the result of just another example of US strength, and the fact that Europe is starting to get left behind in the terms of economic expansion. The EU is expected to go into recession in 2012, and the interest rates should more than likely be cut as well.
The fear trade is back in vogue as the volumes pick back up in the markets as a whole. The holidays are over, and the slight pop we saw on the return of traders has been eliminated completely. The 1.29 level giving way on the daily close for Thursday really was a serious breach of support, and at this point in time this pair is rapidly becoming a “sell only” pair.
The 1.30-ish level should continue to be resistive going forward, and we are using that level as our backstop of sorts. We are only going to sell as long as we close below that on the daily charts. If we do break above it on a daily close, we would be willing to reassess our bias at that time. The market should see fresh sellers come into the picture at that level in our opinions.
The pair could rally as the 1.26 area is a support area on the weekly chart, but it looks as if it is a somewhat minor area. Because of this, any bounce will more than likely be a great selling opportunity going forward. The 4 hour chart can be used to refine any entries on the short side of this market. Of special interest would be a shooting star or bearish long red candle at a round number, with 1.29 or 1.30 being especially preferred. The real question will be whether or not we get that chance to sell from that high of course, as the rout is most definitely on in this pair.
Going forward, we believe this pair goes all the way to at least 1.19 before the move is over. To be honest, at this point parity wouldn’t be a surprise either. (Very long term.) However, there are always Euro bulls in the markets, so bounces are to be expected, and choppiness with a downward bias is what we expect. Knowing that ahead of time, selling shorter-term rallies is probably the safest strategy at this point.
Written by FX Empire