EUR/USD was down 0.1 percent to 1.0631 after touching a seven month low of 1.0591. Due to the divergence on policies between ECB and Fed, markets expect euro will continue to grind lower until it reaches parity with the USD. Local Japanese markets were closed for a public holiday yesterday and re-opened today. The pair continues to be weighed by the negative cross flows from the EUR.
While 131.50 caps upside reactions, expect retest of 130.50 lows and sustained break below 130 to confirm a retest of 2015 lows.
Trade Idea
- While the broader perspective certainly suggests the potential for a retest of the 2015 lows, in the bear term it appears that the EUR/JPY may be supported at the larger descending trend line support zone highlighted in the chart below.
- If yesterday's lows are tested but attract buyers again, I will venture long back through yesterday's highs to play for a corrective bounce to retest the lows of the broader break down, where i would look to reverse longs to align with the larger trend. If the set up develops as anticipated, I will place protective stops below yesterday’s lows.
