EURUSD up against a major support level. Is a break up next?

After chopping around in a 700pip range for the last two months, the EURUSD has once again returned home to its lower ground at the previous low from May this year, the 1.4000 level.  It actually pierced the level last May by about 30pips and has done a small shave below it today with the massive selling the EURUSD today as it lost 240pips from high to low, closing just 30pips of the big figure. The real question on traders minds is ‘can I buy here since its held before or is it going to break?’ This is a legitimate question that has to be asked. First off, if you look at the price action, this would not favor a bounce here.  Why?  Well the lows or bottoms have remained the same (give or take about 20pips) but the highs have lost about 120pips of ground from the 1st peak to the 2nd so the selling pressure came in earlier this time around. Secondly, the most recent price action was a blistering 5 day, 575pip sell off which was selling 4 of the last 5 days with the last day that just closed being the most brutal of selling days suggesting the participation and volume of selling has been increasing as time went on.  This would also mean the force behind it is stronger than it has been in this entire move since the candles have gotten bigger as the move went on. Thirdly, with the major issues facing Europe with a possible (and we think likely) Greece default (see articles at the end of this post, problems getting worse with Italy, Spain finding further problems with its debt (remind you they are heavily exposed to the tune of $700million with a Greek tragedy…I mean default), Portugal, Ireland…need I say more???, We feel the EURUSD will be under continued pressure by people wanting to leave the regional currency. Keep in mind there is one x-factor in all this…..China. They have been buying Euros as they consider them to be a good value and stated they will continue to support buying euros.   With that being said, we could continue to see the pair propped up and there would not be a better time to come in than the 1.4000 level which also was a major support for the pair before it bounced 700pips. But, should the pair fail to hold these levels and have a daily close below the 1.3969 level (prior May 2011 low), then what? We suspect a quick run to 1.3859 which is the prior Feb 2011 resistance before selling off to sub-1.3500 levels and beyond that, at least a move to 1.3700 so about 150-300pips to the downside.  If selling continues to exacerbate along with the Greek tragedy, then there is no reason why the pair could not make its way down to the next big figure at 1.3500 so watch for price action for some clues. For bulls, your chance is now.  Otherwise, the only reasonable and sensible place would be the aforementioned levels. Further links; Rome is Burning Beggars can be Choosers? Italy’s impact on the region Chris Capre 2ndskiesforex.com Twitter; 2ndskiesforex

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