The Euro has few friends these days. As you can see for yourself, the hourly charts are bearish, maybe too bearish, given the lack of any upside momentum in this pair. Short term flows on low volume dominate trading, and this is the case in the CDS market too. News of a bank failure in Spain (insignificant in itself), appears to have increased nervousness in the markets, and that is why, among other things, we see the Euro going down with little support. The RSI indicates an oversold market, but its signals rarely hold much value in a market as chaotic as this one.

Note: Past performance is not indicative of future results.

The Euro remains a sell for us, with the strong caveat that in the short term a turnaround cannot be discounted due to the neurotic state of the market. Given how bearish everybody is about the Euro, it is only a matter of time before a reaction flushes shorts out, severely, albeit temporarily. So if you look for short term gains here, we suggest that you keep your leverage very low (you won`t need as much anyway, since the average distance the price travels in any time period is likely to be longer than what it was before), and be prepared for strong and scary reversals, too. We suggest that you do not confuse the fundamental outlook with the price action. The same commentators who are condemning the Euro with passion now, will be ready to praise it just as passionately once a correction arrives. We regard parity as a sensible goal for the average of the last quarter in this pair, if the fundamental outlook shows no significant changes (such as a war, IMF intervention in gold, a terror attack etc.)

The EURUSD had attempted make a final stand at the 1.30 level around the beginning of the Greek scandal and the debt debacle. As the sharp green line to the downside at the right end of the monthly price chart shows, the failure to hold there resulted in a meltdown, as speculators of all kinds piled on the Euro to contribute to the downtrend. Although the downtrend may appear overextented slightly at the moment, the longer term picture decisively favors the downside, with the monthly charts hardly emitting any signal that would make us question the bears` power. The RSI is approaching levels that previously indicated coordinated intervention and reversal in the Euro downtrend at the beginning of this century. However, this time the fundamental picture favors the dollar as well, with safety plays dominating the long term scenarios, and this is what lies behind our negative outlook for the pair as well. With European governments enacting austerity measures one after the other, it seems a foregone conclusion that any hint of economic revival in the Eurozone will be still-born. What can prop the Euro if Europe offers no hope of growth even as severe doubts are being voiced about the basic viability of its currency?