By: Christopher Lewis
EUR/USD continued the choppiness for most of the session on Thursday as the markets continue to digest all things European. However, as the US session came to a close, the two notch downgrade of Spain by S&P seems to have accelerated the losses that the pair had been starting to experience. The region is known for having many problems, and as a result this really shouldn’t have been much of a surprise. In fact, I have to wonder why it took S&P so long as Spain is a massive problem.
The pair has remained massively stubborn over time, but I see a descending triangle forming, and this latest action is doing nothing to dispel that notion. The question that one has to ask themselves at this point is a simple one: “Which area would you rather park your money in? Would you like it to be in a bank in New York, or Madrid?”
Triangle and 1.3250
The 1.3250 area was the peak of the trading session on Thursday, and this was roughly at the intersection of price action and the downtrend line of our potential triangle. The fact that we have failed at this area again is just another reason for me to be bearish of this pair. Now the real question is whether or not we can get below the 1.30 level. I truly believe we can, but it is going to take an event in order to do so.
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In the mean time, I have been selling rallies in this pair and shorted it earlier in the session again. The pair simply is a no-brainer for me as the Euro is something I am avoiding. After all, the Euro can’t even gain against the Franc, and it is just 13 pips above the “floor” in that pair as set by the Swiss National Bank. Simply put, the Euro is in serious trouble and it looks like we are going to see another move to the downside as a result. I am selling rallies and aggressively selling any daily close sub-1.30 going forward. I will only buy if we get a daily close above the 1.35 handle, which is something I don’t see happening anytime soon.