EUR/USD fell during the session on Tuesday as the fears coming out of the European Union continue. The yields in various debt markets from a Madrid to Rome are starting to spike, and as such demand for the Euro is waning. In a situation where the whole world knows that there are troubles to be found there, this is the last thing that the Europeans need as far as stability is concerned.
I know that a lot of people think a cheap Euro will help with exports, but the fact is the rest of the world is slowing down as well. We are currently in an environment that has several central banks racing towards the bottom as far as currency valuations are concerned. This means that everybody is trying to "win by a losing", and as such everybody is trying to weaken their own currencies. However, in a situation like this there are sometimes currencies that are such obvious shorts that everybody joins that. The Euro is most definitely that currency right now.
Approaching 1.20
Although this chart looks absolutely horrible, and we did manage to break the bottom of the Monday hammer, it is going to be difficult to sell at this point in time. This is mainly because we're just 60 pips above the 1.20 level at the time of this writing, and as such could see a bit of a bounce. However, if this happens I will certainly be selling any weakness on rallies.
The bearish flag that we had seen break down in June suggested that we were going down to the 1.15 handle. There is absolutely nothing on this chart or in the fundamentals that suggests to me anything different. Because of this, I am planning on selling every rally that comes between here and there. As long as the bond markets continue to punish the Europeans, the Forex markets will as well.
I honestly cannot envision a situation where I would be buying the Euro at this point in time, save for a complete federalization of the European continent. Since this isn't going to happen, I suspect that it will be quite some time before I buy the Euro.