Potential signal:
- if this pair breaks down and closes on a daily chart below the 0.82 level, I am not only short of this pair with a stop loss near the 0.8325 level, but I probably start buying XAU/EUR and selling EUR/USD.
- If this pair falls, I can make a strong argument for dropping to at least 0.78 over the longer term.
- During my daily analysis of cross pairs, the EUR/GBP pair looks particularly interesting.
- This is a market that I think will continue to be very noisy, but I’m watching an area in the form of 0.8250 that I think will continue to be crucial.
- With this being the case, we need to watch whether or not we can break down below there. The reason of course is that if we do, we could hit a massive “air pocket” underneath.
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European Union
The European Union has a lot of issues right now, not the least of which can be summed up in one word: France. The French economy looks miserable, and of course there are plenty of political issues in that country as well that leads to instability. This is the biggest problem with a single currency for so many countries, just a handful of them can cause chaos. The fact that France is second only to Germany means that it has and outsized influence on what happens with Europe.
On the other side of the English Channel, we have the United Kingdom which of course isn’t doing as well as United States, but its biggest benefit for traders is that it’s not the European Union. The UK has been doing “okay” for a while, but it certainly has its own issues. However, this is a chart that I’ll be watching very closely because I think this could have massive ramifications across the board.
If the market were to break down below the 0.82 level, then I think the bottom falls out for the euro overall. In that environment, I would expect to see the euro struggle against pretty much anything, and therefore I would be all about Shorty not only this pair, but multiple others. With this, I think a major signal is starting to show itself, now it’s only a matter of whether or not we can see a breakdown. That breakdown could very well happen on Thursday, as the European Central Bank has an interest rate decision, and perhaps more importantly, an accompanying statement.
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