The EUR/USD pair fell hard during the course of the day on Friday, and as you can see crashed into the 1.25 level finding support. That being the case, I feel that the market will more than likely find some type of bounce in this area, simply because the area is such a large, round, psychologically significant number. With that, I would anticipate that a bounce from here is only going to offer a selling opportunity going forward, because the European Central Bank will almost have to do something as far as loosening monetary policy going forward.
On top of that, the Federal Reserve continues to taper off of quantitative easing, which is essentially tightening monetary policy. With that, I believe that this market will in fact crash through the 1.25 level given enough time, and as a result we will more than likely see the 1.20 level given enough time. That being the case, the market will end up being a longer-term sell for me, and I have no interest in buying until we get above the 1.30 handle, something that doesn’t look very likely at this point in time.
One-way trade
Looking at this chart, it’s essentially a “one-way trade.” Don’t get me wrong, I do think that the Euro will get a bit of a reprieve here and there, but at that point in time I am simply sitting up in pain attention as it should offer a nice selling opportunity. The market should continue to be one that a lot of the participants out there are going to be paying attention to, as it is the “biggest game in town.” With that, I believe that we will ultimately see this market offer large profit potential if you are willing to be careful and patient while waiting for setups.
I do recognize that we could get a sell signal right away today, but I need to see the market stay below the 1.25 handle for at least four hours to be convinced of it. If that happens, I would be willing to start selling there as well.
