EUR/USD bears have continued to push lower, after a recent warning from Moody’s which cited that it would review ratings for all European Union countries. Price has now broken 1.3146 (Oct swing low).

We remain short favouring downside scope. Our cycle analysis suggests increased volatility over the next two weeks across "risk" proxies, including the equity and commodity markets.

Yesterday’s close beneath 1.3146 re-establishes the larger downtrend from April and targets 1.3000 (psychological level), then 1.2870 (2011 major low).

Meanwhile, resistance can be found at 1.3550 (02 Dec high), then 1.3610 and 1.3730. Any rebound into these levels is likely to be short-lived.

Inversely, the USD Index is maintaining its recovery higher and has met its recent 9-month highs near 80, (a move worth almost 10%).

Speculative (net long) liquidity flows have unwound from recent spike highs (3 standard deviations from the yearly average). This will likely remain strong and help resume the USD’s major bull-run from its historic oversold extremes (momentum, sentiment and liquidity).

Daily Technical Report