Morning Update

Good Morning,
                        A strong rally Yesterday in Japanese Stocks gave European Stocks a strong day closing near Year to date highs but once Europe closed the American bourses started to go south and have continued lower overnight, now nearly 200 points off the highs of yesterday. It's dangerous to call a top but we now have a technical double top in place on the American Equity Markets and with some fundamental uncertainty around the markets at the moment it looks a perfect time to take some profit for the first 5 months of the year and re-assess.

Price action still trades above a rising 4 hour trendline dating back to the middle of April and firmly above its 200 Period Moving Average.  Buyers will still be found at these levels but a loss of the 200 Day MA and a Close of the candle below here could signal further declines and might see a lot of Bulls re-thinking their long positions.

EURUSD price action looks sluggish after re-testing and failing at its 50% retracement of its decline from 1.37 to 1.275. Looking at the Euro from a fundamental perspective we may see more easing in the coming months as the ECB are the only Central Bank with more available ammunition to weaken their currency in the hope of providing additional stimulus and growth potential. With the U.S. economy improving and hints of an exit from their Quantitative Easing program it may cause a broad Dollar rally against all Pairs which would cause a significant decline in this pair towards the 1.20 mark or lower.
However the Euro has proved to one of the most resilient currencies throughout the past few years and any adversity has always seen it rally back and with the Market being heavily short any form of good news or U.S. negative Data may cause an epic short squeeze in this pair where traders exciting short positions and speculators going long causes the price action to be squeezed higher. For an uptrend to be confirmed a break of the downward sloping trendline from February must be breached. On the other hand a break of 1.2750 would almost definitely open up a test of 1.20 in the coming months.