Quote of the day: All the gold which is under or upon the earth is not enough to give in exchange for virtue. — Plato

EURUSD

Trading strategy: standing aside

The mid 1.27 area where the euro was trading in late Friday’s session before gapping up over the weekend has been a though barrier in the last two days, providing a reversal point on yesterday’s attempt to recover. Looking at both daily and intra-day charts, it is very clear that any euro rallies are aggressively sold, hence short-lived and for each hundred points up – there’s a two hundred points decline to follow. More downside remains on the radar – key levels being seen at 1.2500/20 – YTD low; 1.2455 – last year’s low; 1.2330 – 2008′s bottom; 1.2130 – 50% retracement of long term’s .8225 to 1.6035 bull market. According to the COT data (chart below), the net short euro contracts doubled since a month ago when the euro was orbiting around 1.35. According to the poll I posted yesterday, 60% of you – fellow readers, are expecting the decline to continue and only 10% are expecting the euro to recover. We shall see what next days will bring and how the currency market will digest the officials’ attempts to stabilize the financial markets and stop the free fall, restoring optimism… or what’s left of it after last (Black) Thursday meltdown, when the Dow Jones collapsed 1000 points in a matter of minutes, thanks to the HFT robots. On intra-day basis, selling pressure to emerge in case of short covering rallies remains in the cards – potential short entries on retracement levels of last down leg from 1.3095 to 1.2605, unless a daily close above the 1.2850-1.2900 region will occur, but even then – fresh floors will remain fragile. Current exchange rate is 1.2645 @05:20 GMT

Support: 1.2600, 1.2500/25 and 1.2400
Resistance: 1.2700, 1.2750, 1.2800, 1.2900 and 1.3050
Market sentiment: long term – bullish, medium term – bearish, short term – bearish, intra-day – bearish

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