EUR/USD has fallen hard again on Tuesday as traders continue to vote against the EU summit and the “fixes” that the leaders came up with. Also, there is the continuing threat of downgrades by all three major credit ratings agencies. The Euro is simply a toxic instrument, and the session saw a lower low as the September bottom has been broken through.
The pair managed to touch the 1.30 level, and the area should be somewhat supportive. If the market can get below that level, it should fall much farther, perhaps down to the 1.25 level or so. The market looks as if it is trying to find a reason to rise every time there is a good rumor or comment out of Europe, but the most recent rallies have been much shorter – suggesting that the market is getting bored with all of the jostling between traders and the EU. The market is certainly turning even more bearish, and we could see a quickening of the fall in this pair.
The 1.32 level should now be resistance at this point, and the market may try to retest it as such. The pair continues to be a “sell the rallies” market, and as a result this is exactly what we are willing to do. With the recent turmoil in Europe and general concerns about economic growth globally, we are not willing to sell Dollars, and certainly not against the Euro. Because of this, we can only take one of two positions in this pair: flat or selling.
In order to change our minds, we would need to see the 1.35 level get broken above on a daily close, something we don’t expect to see anytime soon. The pair looks like one that is building up for a sharp move lower, and the entire world is aware of the EU’s problems. If you have tried to buy this pair lately, you have had to be quick about getting out with a profit. The selling of this pair has been easier, and continues to be in the future from where we sit. The breaking below 1.30 has us getting aggressive in our selling. Rallies will be sold as well, especially if the 1.32 does in fact hold as resistance.
Written by FX Empire