EUR/USD

EUR/USD: European open analysis

Courtesy of Chifbaw.com and you can see full charts and analysis on their site.

Recommendations: 

  • Buy the EUR/USD small in between 1.2665-1.2650, medium in between 1.2650-1.2630 and big in between 1.2630-1.2600, SL 1.2550, targets 1.2650-1.2665 (channel trend line), 1.2690, 1.2730, 1.2780, possibly 1.2870, 1.3020, 1.317, 1.335.

Paradigms:

  • The EUR/USD will not make new highs (higher than 1.317) until Spain requests a bailout and the OMT is activated.
  • The market will have a moderately bearish bias until further clarity emerges on the US Fiscal Cliff issue.

Analysis: 

The EUR/USD is now below 1.27 in official oversold territory. This morning the market is bearish due to discords within the Troika on Greece.  In our view, the area of 1.26-1.25 is the bottom of the range within the current conditions and buying support will soon become predominant. The risks are now mostly to the upside: the fiscal cliff issue is not as dramatic as in August 2011 so far, and the new loan for Greece has good chances of being delivered despite all the noise. Therefore, the area of 1.26/1.25 should see some stabilization in this downtrend, and possibly a rebound that would open the way to the next leg up. We should therefore try to pick the bottoms and start building positions to profit from the relief rally. Today, we expect the market to continue to push down the pair. Prices might fall temporarily outside of the down trending channel before reverting to it. We would consider buying everything below the down trending channel (currently ~1.2665) for a return into the channel by the end of the day. For a less risky play, one can look at entering long around the 100-DMA at 1.2640. If we would fall down to the 50% Fibonacci retrace at 1.2605, the EUR/USD would be an absolute buy for a minimum of 30-50 pips profit, but we do not believe that we will get there today.  Since sellers have some momentum, the stop loss levels need to be distant today, deteriorating our risk reward ratio.

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