fxtalk

Last week, right after the Fed Rate Decision, I was announcing a possible short time bearish move followed by a EUR/USD rally, possible up to 1.4500.
Now, the bearish trend is obvious, and the main question is: "For how long will we see this down trend in EUR/USD?"

The general sentiment of the traders is a bullish one, and even I always say that the market movement is not created by the effects of various events but rather by what the crowd believes those effects should be, this bullish sentiment doesn't mean we'll necessary see a reversal in the immediate future.

First of all,on the daily chart, the EUR/USD closed around 1.3630. A close under 1.3650 was necessary to take of the pressure from this pair in order to see a longer term bearish move, not just a week-down-trend. EUR/USD closing under 1.3650 could mean that we could hope to see this down trend at least until Wednesday, the next week, if not more.

On the other hand, keep in mind that the evolution of a currency pair is dictated not by the strength of a single currency, but by the strength of that currency when compared to its pair.

This being said, I believe that this EUR/USD down trend is not happening because the USD is strengthening these days, but, also because the EUR is not having a really bright time either.

If we watch the USD Index, we can see that the USD is close to 78.354 which acts like a resistance point.
If the USD doesn't have the strength to get past this resistance point we could see the bullish move I was telling you about last week.
If the USD will get above the 78.354, the EUR/USD will continue this bearish move, the resistance being around 1.3300.

So, as a conclusion:
How long this bearish move will develop?
USD holds the key: if the USD Index breaks the 78.354, we could expect this down trend to continue down to 1.3300, otherwise it's possible to see the up-trend reversal right away.