Euro Falls Most in 8 Days - Time to Buy the Dip?

RELATED QUOTES

SymbolPriceChange
EURUSD=X1.1221+0.0005

The Euro has lost the most versus the US Dollar (ticker: USDOLLAR) in eight days. Is this the start of a larger pullback or a good buying opportunity? Here are two reasons for why the EURUSD might bounce:

Pros that favor a Euro bounce against the US Dollar

Euro correction in line with what was expected, important EURUSD level at 1.30 offers support

The US Dollar downtrend is intact, and we favor selling as retail crowds remain heavily long

We can’t ignore risks that this could be the start of a long-awaited EURUSD correction, however, and we see two key reasons for which this could be the start of a larger US Dollar bounce.

Cons against buying into the Euro/US Dollar decline

US Dollar may continue to strengthen as Aussie and Euro lead way lower

The US S&P 500 nears a possible reversal, and highly-correlated EUR could decline

euro_us_dollar_long_against_1_30_body_Picture_5.png, Euro Falls Most in 8 Days - Time to Buy the Dip?

We ultimately view a break below the $1.30 mark as somewhat unlikely, and indeed favorable reward to risk on a long position is enough of a reason for this author to take a long EURUSD position against the key level.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, send a message with subject line “Distribution List” to drodriguez@dailyfx.com;

Contact David via

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Meet the DailyFX team in Las Vegas at the annual FXCM Traders Expo, November 2-4, 2012 at the Rio All Suite Hotel & Casino. For additional information regarding the schedule, workshops and accommodations, visit the FXCM Trading Expo website.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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