The very beginning of the first full week of 2009 has made a grand statement in the currency markets. The EUR/USD (a daily chart of which is shown) has made a precipitous decline as of the early hours of Monday. This could indicate that the remarkable rise in the pair seen during the last month of 2008 possibly represented just an exaggerated retracement in the overall downtrend, helped along by low seasonal liquidity and high volatility. In the process, price reached and retreated from a key 61.8% retracement level (as shown on the chart) and then subsequently dropped well below the previously noted 1.3800 support region. Currently, price appears to be targeting further support around the significant 1.3250-1.3300 region. If this is the case, the EUR/USD could well be on its way to a continuation of its downtrend, and the dollar could well be on its way to a potential recovery after drastic weakening in December. Friday’s Non-Farm Payrolls should provide some further indication as to potential subsequent direction.
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[...] noted on Monday’s blog post, bearish price action on the EUR/USD (a daily chart of which is shown) was targeting strong support [...]