We were impressed by the strength in the euro yesterday and thought it might be start of a bigger short squeeze but that has proved to not be the case today as the huge gains have been wiped out in a matter of hours.
We have been bearish on the euro right from the start of the nosedive we have seen and the technical picture after this recent downleg leaves us as bearish as ever.
The European Union finance ministers had a chance to do something to support Greece and boost confidence in the euro but it seems as though the political players have dug in and are holding back on bailout out the euro.
The next main event won’t be until next week, when Greece will reportedly tap the debt markets. We don’t want to be short ahead of that event but we will prefer to sell until then.
We see that the bounce yesterday didn’t reach as high as the highs from the 8th, 9th and 10th of February. To confirm a further downleg we will need to see a lower low. 1.3532 is the target for that confirmation.
We are wary of trading EUR/USD without a tight stop. No doubt there are specs involved in this market that know how short the market is positioned and would like to blow it out like we saw yesterday.