EUR/USD continued to show serious weakness on Wednesday as the pummeling continues. The latest headline out of the Union was that the European Central Bank was suspending monetary operations with several Greek banks as they didn’t have the proper recapitalization in place. Surprisingly, the market didn’t fall much farther at that point, and although I am very bearish of this market I have to admit it was impressive that we didn’t just absolutely meltdown at that point. Of course, there has been a bit of a meltdown over the last two weeks.
The pair will continue to be the epicenter of all things Forex, as the issues in Europe are driving just about everything at this point in time. The “risk off” trade is the main one going on at this point, and the run to US Treasuries seems to be growing. Yields in the US are as low as ever, and the exact opposite is happening in Italy, Spain, and other European countries. As long as that is the case, it is easy to see that money is leaving Europe, and heading to America.
Bank run?
Another bit of news that has been making its rounds this week has been that there has been a sizeable amount of money withdrawn from Greek banks, this amount has been debated, but the amounts talked about suggests that a silent run on the banks could be going on. In other words, the problems in Athens are getting worse, not better.
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The daily candle does of course look like a hammer, and the 1.27 level has held as support. This could be a set up for a bounce, and with the fall that we have had lately, I am ready to admit that a bit of profit taking is probably due at this point. With this in mind, I am ready to close the short position on a break of the top of the hammer for the Wednesday session. However, I will be looking to fade the rally as it bounces. I am not buying even though the breaking of the top of the candle is technically a buy signal. There are far too many problems in the EU for me to own the currency. A break of the lows form Wednesday would be massively bearish at this point, and I do expect to see a run to at least 1.26 going forward.