Despite the recent significant weakness in the broader European and US equity indices, European bank stocks are only just beginning to resume their larger downtrend (as the hopes of a Draghi put remained firm until the last few days of BES debacle). As such, BofA's Macenil Curry believes, they are likely to be the catalyst for the next leg of "risk off" and in that environment EURUSD should continue to suffer.
Chart of the week: European bank stocks are rolling over
European bank stocks are resuming their downtrend. The 6 month topping formation (Head and Shoulders Top) points to further downside in the sessions and weeks ahead.
Downside targets seen to 130.52/126.83 (approximately 8%/11% lower from current levels) before renewed basing.
Stay bearish EURUSD
While intra-day and daily charts say that €/$ risks a further corrective squeeze higher, bounces must be sold.
The combination of vulnerable European bank stocks and poor price action say that €/$ should continue lower to 1.3104 and below.