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The EUR/USD pair fell again during the previous week as the Euro continues to suffer. The debt markets in Europe are looking weaker and weaker, and as such confidence certainly must be eroding from that area at this moment in time. Large money that buys bonds typically will drive currency markets, and not the other way around. This is why you see such a flight from the Euro, as the bond markets have simply been less and less in demand.
Looking at the charts, you can see that we are bouncing along the 1.2150 support level, which was laid out by the hammer from the previous week. Because of this, we feel that the breakdown should continue. The bearish flag that we had been following predicted moves down to the 1.15 level, and we see absolutely no reason why this won't happen. The European debt crisis is far from over, and it just shows how erratic this market has become as it goes from focusing on it, to the next drama, to the next drama again, and then back to the European debt crisis. The fact that the markets have been this patient is absolutely astonishing to us.
We think that the 1.20 level will of course cause a bounce - after all, it is in fact a large round psychological number. The bounce that we get from that level should only attract more sellers, as people have missed out on some of this move down. There is absolutely no reason for the Euro to strengthen against the Dollar at this moment in time, or many other currencies around the world as well. Because of this, we currently are planning on selling any and all rallies of occur in this currency pair.
We think the 1.25 level will now act as a massive barrier to keep this pair down. As long as we are under that level, we will not entertain the idea of buying it. We are in a "sell only mode" at the moment, it don't see any reason to leave it.