EUR/USD had a very bearish Friday, as the Spanish state of Valencia finally admitted that it needs a bailout from the Spanish federal government. While some agreements have been made for bailing out the Spanish banking system, the fact is that the bailing out of Spain itself could be on the horizon. While I don't call for it right away, the fact that one of its largest states has suddenly requested aid suggests that we are heading down that road.
With that being said, the recent bailouts and Greece were big enough problem, now we have to think about larger economy such as Spain. This is a much larger issue, and one that actually could threaten the very existence of the Euro itself. While the Euro may not disintegrate right away, or anything quite so dramatic, it does look as if major changes are going to be made in the currency. What bizarre, we simply do not know yet but it appears that the markets are finally starting to admit this.
Various levels of support destroyed
One of the most telling things about the Friday session is the fact that the candle sliced through the long wicks of three consecutive hammers, and a doji in one fell swoop. This shows massive bearish sentiment, and the fact that the candle closed the very lows doesn't bode well for the Euro either.
Because of this, I believe that the pair will continue much lower. Remember, I had pointed out recently that I saw a bearish flag that measured for a move down to the 1.215 level eventually. There is absolutely nothing in this chart, nor is there anything in the news that suggests to me that we can hit that level. Because of this, I have been short the Euro for quite some time, and will continue to be so for the foreseeable future.
All bounces in this pair should be sold in my opinion, and new lows sold as well. Every time this pair rallies, I began to think about where I can add to my core position. As for buying, I cannot envision a scenario short of the federalization of Europe itself to appease the markets for the long-term.