After a lackluster performance in the EUR/USD, the pair has corrected to the downside after nearing overbought territory. As of late, price action has stalled at the 10-day SMA ahead of the ECB stress tests results which are expected to be released on July 23rd. Indeed, we may see increased volatility ahead of the highly anticipated announcement as uncertainties surrounding the tests remain. However, I think that the report will produce very few positives. At the same time, there is major resistance at 1.300, and daily studies are near overbought levels, which is indicative of further declines. I will maintain my bearish forecast for the euro as the outlook for the 16 member euro area continually worsens; Moody’s downgraded Ireland’s and Portugal’s credit rating, while Hungary failed to tap into the IMF/EU emergency funds of 20 billion euros. Additionally, Portugese auction of 12 month T-Bills was disappointing today. All in all, I am short the EUR/USD from 1.2875, targeting 1.2600, with a break below exposing 1.2440; stop at 1.3110.
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