Thursday, September 8, 2011
EUR/USD Breaches Key Support
Fundamentally Europe is still a mess and no matter what you think of the USD it has to look better than the Euro. That doesn't mean the USD is out of the woods either, which is why being long gold is probably a good bet here, but the USD is clearly the better of the two currencies.
I have been fundamentally bearish of the Euro for many months, but have been waiting for a technical signal to provide confirmation.
I tweeted my 1.4099 short position last night, which I covered at 1.3954 this morning. I am now short again at an average of 1.4007. The break back below key 1.3980 support suggests much further downside potential here.
Not only is the pair trading below the 1.3980 trendline support, it is also now clearly below its 200 day moving average, as well as the psychological 1.4000 level. There is nothing in this chart that is bullish in my opinion and I think we could see a very quick move down to the 1.3500/1.3600, possible as early as this week. Longer term I think 1.2600-1.2800 is a very natural target.
Any bounce in the EUR/USD should be used as an opportunity to add to shorts now, with a stop above 1.4050 or 1.4100 depending on your level of risk.