The EUR/USD pair fell again during the session on Tuesday, as we continue to grind lower. One thing that we notice is that the highs are getting lower, and we cannot help but notice that there could be a possible descending triangle forming. It appears of the 1.2350 level is in fact offering a bit of support though, so we need to get below there in order to feel comfortable selling for a larger move. Regardless, we also believe that rallies at this point time continue to offer selling opportunities as the European Central Bank is starting to look more and more likely to loosen its monetary policy, which is tantamount to more quantitative easing.
With the Federal Reserve stepping away from the quantitative easing game, it makes sense of the Euro should continue to fall against the US dollar as it is without a doubt the strongest currency around the world right now. We believe that US dollar strength will continue going into the next year, so we feel that there’s no way at all you can buy this pair. The 1.26 level above is certainly massively resistant, and therefore any rally of to that area that shows any signs of weakness we feel is a selling opportunity.
We also believe that short-term charts can be used in order to start selling as well, as we believe ultimately we will eventually make a “round-trip” of the overall move, meaning that we should head back down to the 1.2050 firmware the uptrend started originally. We are broken well below the 61.8% Fibonacci retracement level, which is a sign that typically tells we are completely retracing the entirety of the move on the longer-term charts. It doesn’t mean that it’s a given, but it certainly makes sense and one can make a real argument for much more impressive support being found down at that area. With that, we continue to be bearish and have no interest in buying this market, and even if we broke above the 1.26 handle, we recognize there is a massive amount resistance between 1.28 and 1.30.