This past week EUR/USD had an important breakdown. Looking at a quarterly chart to your left, there a number of important clues to consider.
First note that the current bar has taken out the low of the prior bar. Second, note that the prior bar took out the low of an important support point (about 1.2850), a low which held in 3 out of 5 of the prior bars.
The prior bar itself tells a story since it constitutes a breakdown of the 1.2850 area followed by a rally. This price action could be considered finding support and bouncing to the upside. Yet this rally has failed and the next downside target would take us down to the low set in June of 2010 in the 1.1870 area.
As for fundamental reasons, the economies of the Euro zone continue to be a mess. More accurately, the situation can be described as imbalanced. To get an idea of what i'm talking about, consider the differences in bond yields between the respective governments in the Euro Zone. This past week, Germany had a very successful 2 year bond auction, with an interest rates of ---- 0%. That's right, people are buying 2 year bonds from Germany with a 0% yield! At the same time, interest rates debt issued by Greece are close to 30% with Spain, Italy and the the other Euro zone countries somewhere in the middle.
With the vast differences in economic output between the Euro zone countries (and differences in debt yields), its easy to understand the degree of imbalances involved. And since interest rates are one of the primary movers of currency, its easy to see that the Euro as a currency is doomed or at least cannot continue in its current form.
As for trading results, we had some small gains in our Atinalla #1 account this past week. We also had a succesful trades in USD/JPY in our Atipaq Full Portfolio and Atinalla #3 accounts. Atinalla #3 had a good week and gained nearly 3% for the week.
All of the other accounts are underwater and our over-reliance on EUR/USD as a trading vehicle may be playing a part. But our systems profit on both up and down markets, so perhaps we will get some good trending action in EUR/USD (as we did last week) and be able to capture some profits from those moves.
That all for this week, thanks for reading and have a great week.