I have been hoping to get a chance to short the euro for much of the week. I pulled out of my short bund trade because, on reflection, it looked to me like the European crisis that had pushed bund yields down could continue so to do — and that has proved to be the case. The danger with this trade is that any bit of good news may be welcomed by the market and lead to a rally, causing the breakout to fail. That is what happened last time I shorted this currency pair. Even a well-flagged IMF and European bailout of Greece could be a positive surprise as far as the market is concerned.
I prefer EUR/USD to EUR/GBP because there is still a risk that developments in the UK general election campaign could undermine the GBP, even though markets seem to have accepted the idea of a hung parliament.
The EUR has run up today on some good European data, but it is notable that Italian retail sales were the downside surprise. It is not hard for the market to create a story whereby weakness in the Eurozone periphery will impact on the stronger parts, notably Germany, with its dependence on a trade surplus.
Technically the market has broken below a support level at 1.3330. It came back today to re-test, and I took the opportunity to get in. The short-term chart, from IG Index, show approximate entry and stop positions. The long-term chart, from Tradestation, shows the breakout level.