Yesterday we told you about how the euro looked vulnerable against the pound sterling and it proptly fell 100 pips.
Today we are looking at the euro on another front, against the U.S. dollar. The key in this pair for the past six weeks has been the 200-day moving average and today we saw it break below that market — a bearish sign for sure.
The euro has recovered to close above the 200dma, so there is some chance that this was a false breakout, but overall, it’s not looking good for the 16-nation currency. The problems in Greece are haunting the euro, with both the removal of Greece and a bailout as abhorent solutions. It’s also something that is no going to go away. The second thing that is dragging on the euro is weak economic data. The ZEW survey on Tuesday was far below expectations and it seems like every piece of data from Europe is disappointing.
In short, the fundamental and technical outlook is poor.
This chart shows the only line that matters right now — the 200dma. We can see that it’s sitting right on the line after falling about 40 pips below it earlier. We expect that it will fall definitely below the line in the next day or two. The next test will be the Dec. 22 low of 1.4217. If that breaks, a fall to 1.40 is likely and a target as low as 1.3750 possible.