The EUR/USD pair continues to be the absolute center of the Forex world on Friday as the problems in the European Union are front and center yet again. The Greek elections have really set a lot of traders on edge, and the anti-austerity parties took significant amounts of parliamentary seats. The fact that the government cannot come to a consensus suggests that we could get another election in June, and this could possibly have the Greeks electing more extreme factions as they say no to austerity.
The biggest surprise about the elections is that it was a surprise at all. Greece has up to a 25% unemployment rate at the moment, and is in something very close to a depression at times. The idea that they would be willing to do it much longer shouldn’t be a surprise at all. The Greeks look at this set of austerity measures as being forced upon them by the Germans. National pride comes back into the picture when that situation arises, and the Greeks have even elected some extreme nationalist parties as well. Nationalism seems to be on the rise in some parts of the country, and when pride is on the line – to think that the Greeks are going to put up with much more would have been at best wishful thinking by the market, and at worst delusional. The fact is that Greece will be leaving the European Union sooner or later.
Looking at the technical parts of the market, there has been a serious acceleration to the downside recently. The elections had seriously negative effect in this pair, as we saw form the gap down on the open this past week. The market managed to break the support level of 1.30, which was an area that simply fought the bears over and over. The rumors out there suggest that the Chinese central bank has been fighting the depreciation of the Euro as they have diversified from the Dollar.
The break down has cleared the way for further bearishness, and the fact that the gap was filled and rejected the bulls suggests that the bearish momentum is starting to come to life. The candle for Thursday and Friday both are shooting stars, and when you get this at the bottom of a down move, it normally signals that we are about to see some kind of follow through. The market simply looks sick at the moment, and buying the Euro is without a doubt the most reckless trade we can think of at this point.
A break of the bottom from the Friday session signals another selling opportunity for us, and we would add to our already short position. The 1.26 level below is the last major swing low in this market, and because of that we think that there will be support at that point. It is our opinion if the 1.29 level gave way we would see 1.26 in fairly short order.
Written by FX Empire