The Euro is Primed for a Big Move

• Posted by Robert Sinn
• on May 3rd, 2012

$EURUSD has been trapped between 1.30 and 1.35 for over three months much to the chagrin of the large contingent of euro bears who have been projecting a large downside move to 1.20 or below for many months. Recently the range has tightened further to 1.31-1.33 ( such range tightening typically precedes a large breakout move) – the technical prognosis for EUR/USD certainly isn’t very inspiring due to the weak bounce following last year’s 2000+ pip decline and the descending triangle which is currently forming:

Click to enlarge

 

Moreover, sentiment is tilted firmly to the bearish side with some commentators even referring to the euro currency in the past tense. The consensus opinion is that easier ECB monetary policy (LTROs and SMPs) combined with the significant downside risks emanating from Spain and political risks in France/Greece etc. will result in a gradual decline toward 1.20 by the end of 2012 for EUR/USD. However, as we know the consensus forecast is rarely correct particularly when it comes to broad macro currency predictions. The bearish consensus for EUR/USD could be turned upside down in the event the ECB does not pursue additional accomodative policies and/or the Fed embarks upon additional QE. Given that 1.30 has proven to be strong support time and time again, it seems to me that the risk/reward is firmly skewed toward EUR/USD long positions at the current time.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus