The EUR/USD concern is German 10 year Yields below 1%, Euribor and Eonia at or approaching 0 and German bonds 1 - 3 year yields approaching negative territory. This lineup wasn't that bad during the Greek crisis and German yields haven't seen these levels even during the Great Depression. If Draghi takes on QE, he ensures further drops in interest rates, yields and the EUR/USD. But where.
Most significant ranges are found between 1.2481 - 1.3397, 1.3467. Possible bottoms are then found between 1.2800 - 1.3000's. Vital points are found at 1.2768, 1.2802, 1.2813, 1.2863, 1.3029. Any lower forecasts will take quite some time to achieve because those bottom averages must drop. The problem again is any approaches to 1.2700's, 1.2800's leaves level at 1.3397 overbought yet severely oversold vs 1.2400. Intraday to long term, EUR/USD is oversold, further drops only leaves EUR/USD more oversold.
Intraday target is 1.3373 and still below vital 1.3397. Fundamenally, if US CPI hits or surpasses PCE at 2%, this could drop EUR/USD far lower. The strategy moving forward is cautious sell rallies. My concern so far is we are within a few hundred pips from a significant bottom unless Draghi takes on a QE or some such disaster. That ensures EUR/USD remains at current lower levels for quite some time bouncing between 1.2481 - 1.3397.
Below levels: 1.3225, 1.3143, 1.3102, 1.3086, 1.3085, 1.3029. 1.3863, 1.2813, 1.2802, 1.2768. Above: 1.3252, 1.3264, 1.3371, 1.3397, 1.3467.
Factor the USD/JPY scenario, 104.34 must break to go higher. Currently severely oversold and needs correction
More trades posted on this post post during the week. Questions, comments, feel free anytime.
Brian Twomey Inside the Currency Market, btwomey.com