The EUR/USD pair had another rough session on Friday as we initially trying to rally, but found the sellers far too aggressive to do so. The daily candle ended up being a shooting star, which of course was place of the bottom of a fairly steep selloff. This is almost always a very negative sign, and as a result there is a good chance that we will continue lower.
However, it should be noted that there is quite a bit of noise between here and the 1.33 level. Underneath there, you can see that the 1.3250 level looks to be somewhat noisy as well, and this is my biggest problem. There's just so many minor support levels between here and 1.30 that I am not comfortable selling this pair. Even though I can see there is definite weakness in this marketplace, sometimes there are just easier trades to take.
In fact, I believe that there will come a point in time where we get the by this pair at a cheaper price. Let's be honest here, the main reason this pair has fallen is because of a few choice words by Mario Draghi after the European Central Bank’s meeting on Thursday. In the aftermath of that meeting, he suggested that the value of the Euro was far too strong and was damaging the export market for European nations. He suggested that it was a drag on the economy, and as a result there was a possibility that monetary policy would have to be expanded.
Whining
With all that being said, nothing was actually done. Because of this I believe that the knee-jerk reaction is just that: a knee-jerk reaction. This is more than likely overdone, but this is been a very bullish market lately, and a nice pullback certainly would help the buyers build up momentum again. Looking forward, the Europeans entering the "currency war" could make things interesting, but they are well behind the Japanese and Americans. Because of this, I feel that the Europeans are going to "lose" this fight, and see a higher valued currency.
