The EUR/USD pair had a fairly quiet session on Friday as the 1.25 level continue to hold the support. However, it does in fact look like we are trying to form some type of bearish flag. This is a very similar pattern to the EUR/GBP pair at the moment, which suggests that the euro may be in a little bit of trouble soon. The fall in this pair has been fairly orderly, as one would expect was so many central banks being involved. However, the market simply is growing tired of the lackadaisical attitudes of European leaders. There is a European meeting on Thursday and Friday of this coming week, and this could of course produce some type of fireworks however, all things being equal we believe that this pair continues to fall. On a daily close below the 1.25 level we think that selling the euro at that point would make sense.
The potential bearish flag being formed in this market suggests that we could see prices as low as 1.15 or so. While this may seem a bit drastic and unrealistic, the reality is that the move could take months if not years. With that being said it isn’t hard to imagine a situation where Europe struggles to grow for some time. This of course would continue to weigh upon the euro, and by extension should move this pair much lower.
The pair looks very bearish at the moment, and we just simply won’t buy. A break above the 1.30 level is what it would take for us to become bullish again. It’s very highly unlikely that we will see this happen, and as such we fully expect to sell. Fading rallies on week candles is one of her favorite strategies for this pair currently. Again though, if 1.25 gives weight to the bears, this pair should continue much, much lower. With this in mind, we expect to see several selling opportunities over the next couple of weeks, and are having a difficult time coming up with a reason to buy.
Written by FX Empire