The EUR/USD pair looks absolutely horrible at this point. The markets are currently trying to track down a massive amount of bad news and potential dangers out of Europe, and it seems that the risks are everywhere and growing by the day. It is under this umbrella of doubt that the Euro finds itself trading these days.
The biggest concerns of course are the debt markets, but we also have concerns about Greece leaving, the banks in Spain, and many other political issues. The Euro simply doesn’t make sense if you think about it, and it is almost as if the world finally figured that out. Simply put, the bears are out for blood at this point.
The recent fall has been brutal, but to be honest a lot of it is probably pent up from the stubbornness around the 1.30 level. That level held up so long that there were serious doubts by many that it was ever going to give way. The breakdown since then has been astonishing as we have fallen 700 pips since then.
I believe that the 1.21 level is next. Granted, the Non-Farm Payrolls may cause a bit of a move in this pair, but at the end of the day money will continue to run to the Dollar. This is because a good jobs number would only solidify the United States’ favorable position over Europe. Also, if the number was bad, it would imply an addition to the “safety trade” which involves selling this pair as well. In other words, there is a bearish case to be made either way.
The Euro will suffer until the Greek elections on June 17. The biggest concerns are that the hard left parties will come to power, and this would put the whole bailout agreements in jeopardy. The fact is that as long as that is still a significant threat, all rallies will be sold by me on the first sign of weakness. The politicians in Europe have made a real mess of this situation, and as such I simply cannot envision a scenario in the short term that would have me buying.