The EUR/USD pair did very little during the low-volume holiday on Friday, but recent action shows that this pair is without a doubt bearish and its momentum. However, the 1.2750 level has offered enough support to cause a bounce, and as a result we think we may get a little bit of continuation going forward. Nonetheless, we are very bearish of this pair and more than willing to sell these rallies.
We believe that the 1.27 level is massive support, and as a result if we break down from here it’s going to be difficult to be short of this market. Allowing the Euro to appreciate a bit gives us a chance to sell from higher price point, allowing us to perhaps pick up some momentum in order to smash through that level. At the very least, it offers us enough room to maneuver and perhaps make a fairly decent profit in the process, even if we don’t manage to break down below the 1.27 handle.
It is our opinion that the Euro will continue to be weighed upon by the specter of depositors having to bailout banks. The banking system in Europe continues to be an absolute mess, and now that the line has been crossed, there is very little to suggest that depositors couldn’t be raided in places like Spain, Italy, Portugal, Ireland, and of course Greece. If they have to bailout the banks, this will cause an absolute panic and the banking sector on the continent. In fact, we suspect that there will be a silent “jog” on the banks. This will be measured in electronic transfers from places like Frankfurt and Paris to other banking centers like London and New York.
Because of this, we believe that the Euro offer plenty of selling opportunities when it does bounce. Longer-term investors will certainly one nothing to do with risking money in Europe, although Germany may be the one exception. However, given enough time peripheral countries could also bring the Germans down a bit as well. Because of this, we are only selling the Euro for the foreseeable future.
Written by FX Empire