The EUR/USD pair fell precipitously during the session on Friday as we broke down through the up trending line, as well as the 1.29 support level. At this point time, we see the 1.28 level as the last vestiges of support. The Euro certainly seems to be we call the sudden, and the fact that it could not punch to the 1.30 level with any significant follow through was your first hint of serious trouble.
Perhaps the world will start focusing on European union debt issues again, and if that’s the case the headlines will move this pair lower. It should also be noted that if Gov. Romney wins the US presidential election on Tuesday night, he has a strong Dollar policy. In fact, he is against the rehiring of Federal Reserve Chairman Ben Bernanke for his easy monetary policy. If that’s the case, the Chairman will be gone at the end of 2013. However, there’ve also been rumblings that the Chairman may actually choose to resign ahead of time.
Quite frankly, we are perfectly comfortable shorting this pair now. However, the breaking of 1.28 would be a significant turn of events in this marketplace, and have us hunting for the 1.25 level. We certainly are more comfortable shorting the Euro, as there are a plethora of problems over in that region. Quite frankly, we think that the US dollar has been oversold recently, and a return to “safe haven assets” is probably long overdue.
Looking forward, we think this pair tests at least the 1.25 level, and may fall even significantly farther than that. There simply far too many issues in the European Union to ignore them forever, and it also is worth mentioning that the Europeans wouldn’t exactly be upset with a weak Euro. In fact, it will be a great way to inflate their way out of the debt issues. Because of this, we are still very anti-Euro, but need to see some type of follow-through to start adding aggressively on the way down. As far as buying is concerned, it simply is not an option.
Written by FX Empire