We’ve had some movement in currencies, but volumes remain very light, and implied volatility low (despite the existence of what we know to be “issues” in Europe, implied volatility for 3-month at-the-money EUR/USD options is under 10% (9.625%, according to Bloomberg), down from 13% at the end of May.
Back on the 10th – or Friday, if you will – I suggested that those remaining short of EUR/USD following the touch of 1.2250 take some profits, and trail a stop down to 1.2330 or so. The latter level would have been hit yesterday, and we made it back almost to the 1.24 level (1.2386) that looked attractive for the establishment of new shorts.
On the hourly chart – the shortest term chart that I use for currencies – EUR/USD remains in an uptrend, with 1.2310 looking like the next potential support. Once through there, the downtrend will probably be reestablished in this timeframe. On the daily chart, the downtrend has yet to break, with 1.2400 and 1.2480 showing signs of serving as resistance.
It may take a while, but another test of the recent low at 1.2043 seems plausible; a move back above 1.2480/1.2500 would suggest that this scenario is “wrong”, to use the technical term. On the daily chart, something around 1.2210 seems poised to provide at least some support. The big macro events – central bank meetings, and the like – won’t happen until September rolls around, so patience and/or some shorter term trades may be required.
Best of luck.