The EUR/USD pair formed a hammer on Wednesday that had me thinking that a bounce was coming. On Thursday, it fell even further. The market managed to break below the bottom of that Wednesday hammer, essentially voiding it. Added to this, we have had a couple of bearish headlines for Europe during the Thursday session as well. Sometimes when a market is oversold, the traders will simply continue to sell. This could be what is about to happen.
Fitch decided to cut its ratings of Greece again, only adding insult to injury at this point. Greek banks have been reportedly going through a silent drain, and the run on these banks could continue as the political situation in that country seem to suggest that an exit from the European Union is a real possibility at this point in time.
The ratings agency Moody’s has also cut ratings for four Spanish regions and many banks as well, and this can only continue to work against the health of the debt markets in Europe going forward. Debt markets are one of the most important indicators of economic health for a region or country, and there are several that are completely distressed at the moment on the continent. Because of this, I cannot buy the Euro at the moment, and quite honestly don’t see a good ending ahead.
1.27
The breaking of 1.27 is a significant event as it proves this market can continue to fall. If we see a bounce, it will simply be an excuse to sell more on a weak candle, perhaps on the 4 hour chart or even hourly one.
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A break below the Wednesday candle again is also a selling opportunity, but I do see support at the 1.26 level as it was the site of the massive bounce that send the Euro over the 1.30 level previously. With all of the negativity out there and possible problems out there, buying isn’t possible at all. In fact, I would need to see a daily close above the 1.33 level in order to even contemplate going long.