We worried about the euro in our post yesterday and it appears our worries were well founded. The European session led to a huge short squeeze in the euro, pushing it briefly above our resistance level at 1.3016. The gains were short-lived, however, and the euro has plunged back below 1.28.

We can see the huge reversal on the daily chart. The implications going foward are bearish. The Eurozone rescue efforts won’t be seen as a failure unless we fall below the 1.2521 low from May 5 but at this rate it won’t take long.

Analysts around the world were quick to dismiss the rescue efforts. Some noted how the 750 billion euros will be enough to cover funding needs for Greece, Portugal, Spain and even a portion of Italy’s deficit over the next three years but others noted that the required deficit-cutting and growing public unrest in Germany and Greece are threats.

We won’t argue with the market’s reaction. The European sovereign debt crisis will be over when it’s over. Some stability above 1.2521 will be a good sign but until we see a close above 1.3016, we will remain in the bearish camp.

It’s a scary day in markets today. Stocks are getting beat-up like the credit crunch was still raging and the S&P 500 have given up some important support. Commodities are down big. The Australian dollar is getting crushed despite a rate hike that wasn’t fully expected. And our long gold trade is giving back most of its gains (but it’s still in the money).

Everyone knows the markets are in for a rough ride at some point after the generational rebound from The Great Recession. Is this the big correction? We think it could be, but our conviction is still low.

In the meantime, we look to the charts. Yesterday, we talked about USD/JPY and we have to note that it got as high as 94.99. We warned about the possibility of a false breakout. Now that we’re back to 94.40, we think the chance of a reversal is growing but we reserve judgement until Japan comes back from holiday at the end of the week.

The pair we want to focus on today is EUR/GBP. The euro is getting smashed today. Greek 2-year yields are back up to 14% and European policymakers must be starting to think about hitting the panic button.

Two months ago, the euro was beating up on the GBP on worries about a hung parliament in the UK. Now, it seems like electoral deadlock in Thursday’s election is among the most minor problems in the eurozone and its periphery.

This is an important break below support at 0.8601. We expect a bounce to a re-test of this line and that bounce should be sold. The problems in Europe far outweigh concerns in the UK. Moreover, the Conservatives have gained momentum heading into the election and could pull out a majority (we put the odds at 50-50).

We target 84.50 or 84.00.

Fundamentals:  We have a few announcements today which will likely affect the market.

Coming from Switzerland we have the “Producer and Import Prices, Producer Input Prices”. The previous announcement was 0.0% and the Forecast is 0.1%. (07:15 GMT).

One more announcement coming in from Europe. Industrial Production which will be released at 09:00 GMT, previously resulted at -0.6% and the forecast for today is -0.3%. Later on we will have the FOMC Member Lacker Speak at 16:30 and At 19:50 we will have the FOMC Member Yellen Speak (US)

one of the most obvious indicators of the dollar condition is certainly the INX  chart ,as shown on the chart below we had  a clear trend  with the USD, shown from a technical & fundamental  point of view .the current trend  clearly reflects the situation of the USD against most of the world’s currency, especially when we face such a recession in a global scale. We deal with the biggest question on daily basis which is, what is the next strongest currency ?

It appears like most of the world wants to look for a new primary currency.  We should not be too radical when we enter any transaction this week. Let’s go over what happened the last few days.

EUR/USD

What an amazing weekend, we had a few fascinating moves that only adds more money to our packets.  Checkout the latest move from this pair.  We can see that once we join the trends here we can make a good amount of money with this pair. We will need to see what’s going to happen this week, and with that data we can start working step by step.  We will start by looking over the EUR/USD, lets break it down and we will see how much money we can make dealing this pair.  we can finally see the EUR break the Resistance line, now we will need to start analyzing what will happen next.  The 1.4717 high from December 2008 is next if the EUR continues with this uptrend.

Resistances 1.4560 – 1.4630

Supports 1.4520 – 1.4460