The US dollar resumed its bullish rally after Federal Reserve Chair Janet Yellen stayed on course with the idea of raising interest rates in 2015. Dollar strength was across the board with the euro ending a two-week rally.
The EUR/USD daily chart displays the key breakdown of the uptrend line and the return inside of the longer-term bearish trend line. With the Fed not backing down on a rate increase next year, it appears that euro should get ready sooner than later for a major low.
The recent rally is identified with a bullish butterfly pattern that triggered a bullish reversal with the December 8th low at 1.2246. The bullish climb was able to rally above all the key points with the exception of the point A level. This inability to breakout above that key area opens the door for another selloff with the downtrend firmly in place unless 1.2650 is breached. Major support will come from the 1.2000-1.2050 zone.
The trade: Sell EURUSD at 1.2350 with a stop loss at 1.2450 and a take profit at 1.2050. The Risk/Reward Ratio is almost 1:3
Edward J. Moya