Last week I was prudent to start taking profits on my short EUR/USD trade as a five day decline started left the pair oversold. My target of 1.2500 was never hit, but booking gains allowed the trade to ultimately end in profit. The pair is finding support after failing to break below the 50.0% Fibo of 1.1876-1.3336 at 1.2610. A break below the technical would justify a short position and is the trade that I am targeting. However, I will remain cautious as the potential exist for a hawkish ECB president Trichet following Thursday rate decision. Therefore, we can’t rule out a test of the 20-Day SMA at 1.2870 before the prevailing bearish trend continues.
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