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The EUR/USD pair fell during the Monday session after forming a shooting star at the 1.23 level on Friday. This is a bearish turn of events, but it should be said that there was a little bit of the bounce towards the end of the session. Based upon the candlestick formations however, we feel that a break of the lows on Monday would in fact be a reasonable sell signal. We are necessarily looking for a complete breakdown at this point in time, but rather return to the bottom of the consolidation area which sits just above the 1.20 handle.
With the events in Europe been in the state that they are lately, it is no surprise that the Euro would selloff in general. It should be noted that the Euro had formed shooting stars against several other currencies as well, it and as a result this looks like Euro weakness rather than any other complex set of ideas.
Later this week, we will have not only a central bank meeting by the ECB, but also the US jobs number. This should set up for a very important week as far as data is concerned, and as such this pair will more than likely have made some significant move by the close of business on Friday. With that being said, we think that paying attention to the larger levels such as the 1.20 and 1.24 level is going to be absolutely crucial during the week as we will more than likely get slapped around by the headlines.
Looking forward, this pair is most certainly in a downtrend, and we can't see how this will change. More than likely, the ECB will do something to ease monetary policy which should in turn weaken the Euro in the long run. In fact, the Europeans would probably prefer a weaker Euro, and this should continue to work against the value of this currency pair. Granted, the Federal Reserve could ease as well, but the fact that the European Union is undoubtedly in a recession and possibly even worse over the next couple of years and some countries, does lend itself to a weaker Euro. Because of this, we are only selling this pair and will of course do again on a break of the Mondays lows as mentioned before.