This week was dominated by the US and European central bankers speeches. They both confirmed their accommodative monetary policy. However the FED just confirmed its commitment to the bond buying program until the economy would have showed sign of improvement. The ECB, on the other side, decided to take really strong actions cutting rates and promising to back the economy strongly through a low interest rate. So, everything else being equal, the Euro should depreciate against the dollar given the change in the stance of the central banks. Moreover, after some bad data, released an unexpected and strong data for the jobless claim figure was released and an improvement in the US economy can push demand for dollar denominated assets. Moreover the dollar recently underperformed other currencies but we believe that this trend can revert.
Looking at the Euro-area there are many issues unsolved such as the peripheral debt and low growth of many economies. Indeed, Slovenian debt was downgraded, Italian political uncertainty has not been solved at all and the France situation is getting worse as time passes. Uncertainty in peripheral countries situation is one of the most bearish factor for the euro.
Coupling all off this factor we believe that 1.315 is a too high value for the pair. We suggest a take profit around 1.28 and a stop-loss of 1.33. The trailing profit should be set according to the rule of the half target. We suggest reviewing this position after 4 days to see if the position should be closed.