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EUR/USD is below 1.34 once again, erasing the neat recovery made after the Greek accord. Here is why I think this move will be sharper and why the pair will drop lower.

EUR/USD began a dip on thin Easter Day trading on worries about the Greek austerity plan. These worries became stronger. The Greek crisis made a big comeback. But things changed:

The comeback of the crisis means a reversal of the upwards move that began after the leaders of the EU reached an agreement regarding the crisis. Just a few days after EUR/USD made a dive below 1.3423 all the way to 1.3267, the optimism sent the pair higher, and it eventually touched 1.36.

Now it’s back to 1.3360, below last week’s low of 1.3380. The move is still on.

Here are the reasons why I think EUR/USD will continue down:

  1. Greek colossal  failure – strong fall: The European leaders put all their weight on the resolution. Even Jean-Claude Trichet became optimistic. If the big ones fail, this is a failure for the Euro. The Greeks currently deny their U-turn, but they make it clear that it’s hard to work with them.
  2. Hard climb – strong fall: In the past few months, EUR/USD made steady and slow moves higher. The pair traded in an uptrend channels, failed to continue climbing and made a sharp fall. This pattern of “rise before the plunge”, repeated itself. Learning from the near past, the pair should fall lower this time.
  3. Dollar strength: Although there are many doubts about the Non-Farm Payrolls, lots of figures, from housing through manufacturing and up to GDP point to real growth. US dollar strength is EUR/USD weakness.

The next support line is 1.3267, the year-to-date low. Below that, it’s only 1.3080 which was the level before the Euro began the long-term rise last March.

What do you think? Where will it go next?

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