The EUR/USD continues to inflate trading accounts of those who have been shorting it and waiting for it to act “properly.” After all, it seems like just a week or two ago I and most of my trading friends simply couldn’t understand how this pair remained above the 1.30 level at all cost. (Full disclosure: It was.)
The pair has been the epicenter of all things risk adverse lately and there hasn’t been a shortage of bearish headlines to go around. However, until we got below the above mentioned 1.30 level it seemed as the pair was never going to follow the fundamentals.
There are reports that as much as 900 billion Dollars has been withdrawn from Greek banks recently, and this could be the start of a run on the banks in that country. If this is the case, there could be a similar move like this in places such as Spain, Portugal, and Ireland. In that scenario, the Dollar will absolutely skyrocket in value.
Continued bearishness
There is absolutely no reason to own the Euro at this point. The recent fall has been very significant, and the descending triangle from before the break of the 1.30 level measures for a move to the 1.25 level. The 1.26 area also shows the last significant supportive bounce on the longer-term charts, and that level could also be a target. In all honesty, a fall to below the 1.25 level isn’t a real stretch in my opinion as well, considering the European Central Bank will have to absorb a ton of losses for several banks and countries by printing Euros at this rate. Flood the market with currency, and it falls. The Americans can tell you all about that. The ECB is about to become the Fed in a lot of ways.
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The pair can only be sold at this point, and all rallies will be treated with suspicion. The 1.30 level should be the ceiling in this market going forward, and now the real question is whether or not we can break lower than 1.26 or so. I think we not only can, but more than likely will. However, there will always be little “hopium”-fueled bounces along the way but those will only be selling opportunities in the end.