“Who knows?” is the answer but we can look at the places where we’ll likely see the buyers coming in.
Big moves usually mean that it’s best to pull out wide on the charts and look for the bigger levels as places to place a trade. The monthly chart is looking like it could give us the best prospect.
EUR/USD Monthly chart 06 11 2014
The last time we were down this low the Eurozone was in danger of disappearing up its own keister, or was that the second time? You tend to lose count as far as the Eurozone is concerned, but anyway, here we are again. The big level I’ve got my peepers on is the June 2012 support line which is also joined by the 200 mma around 1.2216/30. We marginally stepped through it back in 2012 but the confluence of the 200 mma and the 2011 support line was enough to halt it then.
Across the crisis there’s only been 2 periods where the euro has fallen for 5 straight months, when we fell from the 2008 highs and then late-2009 to mid-2010. We haven’t completed month 5 yet in this run but it’s looking on the cards.
Some wiggle room may be needed with a big level like this so I plan to trade it down to the big 1.20 level and maybe a break of the 2010 low as a stop point.
I lost money earlier in the year on looking for a recovery in Europe and I was long from 1.38 and more, until I was stopped out around 1.33. That’s the importance of having stops and a plan as we’re now nearly 1000 pips worse off than my stop. This trade is going to be more from a technical standpoint rather than fundamental. I’m not keen on Europe right now but the ECB are doing something and if it works then it will be supportive. With QE still on the table the risk is for big falls still but at some point the market will look for a positive reaction to come in, be it inflation or economic data. Lots in the balance as always but the tech is looking good.
