EUR USD Pares Losses after Gap Down

June 29, 2015 – EUR/USD has clearly been one of the most significant markets to watch following developments over the weekend in Greece that sent global equity index futures and the euro tumbling at the very beginning of the new trading week.

The precipitous drop for the currency pair created a gap down below major support at the 1.1100 level to hit a low around 1.0950 early in the Asian session before tentatively recovering and largely filling the gap by early European session.

This substantial plunge highlights the increased anxiety surrounding the likely Greek default and exit from the euro. It also magnifies both the long-term and short-term bearish bias for EUR/USD, and places the pair at a higher probability for a potential resumption of the longstanding bearish trend that has been in place for more than a year, since the 1.4000-area high in May of last year.

Prior to the gap down, price action had been trading in a range above 1.1100 support since early June, and had continuously retreated from 1.1400-area resistance on rebounds within this trading range.

Late last week saw the currency pair trade in a tight consolidation around its 50-day moving average, seemingly in tense anticipation of any news that might trigger a breakout in either direction.

After the breakdown and subsequent gap fill, EUR/USD is currently fluctuating around the noted 1.1100 previous support level and still below both the key 200-day and 50-day moving averages.

With the situation in Greece continuing to plague the euro as well as persisting US dollar strength, the broader outlook for EUR/USD remains bearish, with a potential return back down towards its 12-year low of 1.0461 that was just established in March.

In this event, the next major downside target is around the key 1.0800 support level, followed by the major 1.0500 support area that saw a rough double bottoming pattern in March and April.