fallenDC

CFTC trader positioning data

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that:

• The net short euro position increased to 174k contracts on May 15th from the previous week’s total of 107k contracts. This is the highest level on record beating the Jan.23 level (171.3k contracts).

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• The net short yen position decreased to 34.3k contracts after the previous number 41k contracts. Yen positions keep improving for a fifth consecutive week.

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• The net long pound position declined slightly to 25.0k contracts following the previous total of 25.3k contracts. Pound positions reached its highest level on May 3 (30.8k contracts)

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• The net short Swiss franc position fell sharply to 26.6k contracts following a total of 16.4k contracts.

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It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

Nomura: short-term economic outlook

Global:

• China‘s growth re-accelerates in the second half after a first half slowdown to just above 8%.

• Downside risks: an oil price spike; a euro-area flare up; the US end-2012 fiscal cliff effect; a China investment slump.

• Upside risks: US consumers shrug off post-crisis blues, releasing pent-up demand; oil prices drop; euro tensions ease further.

U.S.

• Healthier labor market will continue supporting a revival of pent-up consumer demand in 2012.

• Look for the FOMC to maintain its current policy for now, but to respond quickly if downside risks intensify.

• Policymakers won’t act until after the election to avert the effects of severe fiscal tightening scheduled to begin in 2013.

Europe

• Look for the European Central Bank to cut the refinance rate to 0.50% in July with risks skewed towards less and later.

• Assume the euro zone crisis will escalate and expect a new round of QE.

Asia

• Reconstruction is set to spur Japanese growth in the first half of 2012 even with slowing overseas economies.

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Source: Forbes

Greece: update from the battle-front

Greece’s future remains extremely cloudy. Opinion polls differ. According to one, the distribution of votes will be the following:

28% - for Coalition of the Radical Left (SYRIZA);

24% - for conservative New Democracy;

15% - for socialist PASOK;

8% - for the Independent Greeks, a right-wing anti-bailout party;

7% - for pro-European but anti-austerity party.

According to another survey, ND is ahead of SYRIZA. New Democracy and PASOK signed Greece’s debt deal with socialist PASOK but has long pushed for a renegotiation of the terms of the agreement. Alexis Tsipras, the leader of SYRIZA, started 2-day visit to Paris and Berlin today. Yesterday Tsipras claimed that his party’s opposition to Greece’s debt deal would not mean a euro zone exit, while ND leader Antonis Samaras accused him of making empty promises.

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REUTERS/Yannis Behrakis

Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2700, $1.2780, $1.2800, $1.2900 and $1.3000;

USD/JPY: 79.50, 79.75 and 80.00;

GBP/USD: $1.5785, $1.5880 and $1.5900;

EUR/GBP: 0.8000.

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Image from seoklass.ru

May 21-25: Events to watch

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Monday, May 21:

• Canada: bank holiday (Victoria Day). The day is practically empty of important economic events. As a result, traders get ready for tomorrow with the Bank of Japan in focus.

Tuesday, May 22:

• New Zealand: the release of inflation expectations data (Q1), a leading indicator of economic sentiment.

• Great Britain: Consumer Price Index (CPI) in April is forecasted to grow by 3.1% (a decline in comparison with a 3.5% growth in March, but still much higher, than a 2% BoE target). It’s possible, however, that the rate falls to 3% (the lowest since February 2010) saving the BoE Governor Sir Mervyn King from issuing the inflation letter (the letter is only required if the inflation is below 1% or above 3% and is written to explain why inflation has overshot the target). Public sector net borrowing in April may decline to minus 5.4B vs. 15.9B in March.

• U.S.: Annualized number of existing home sales – the main gauge of housing market conditions – may increase from 4.48M in March to 4.65M in April supporting the idea of the nation’s economic rebound. The labor market is America’s weakest spot and many investors go the US nowadays only because it’s better than Europe.

• Europe: consumer confidence in the euro area will likely remain low. Don’t wait for any surprises here.

• The OECD (Organization of Economic Cooperation and Development) will release its global growth forecast.

Wednesday, May 23:

• Japan: Trade deficit is expected to decline slightly to from 0.62T in March to 0.60T in April. Positive trade balance report may support yen ahead of the BOJ announcement. The markets will be eyeing the Bank of Japan’s meeting. The benchmark rate is seen unchanged at 0.10% level, though the central bank may be forced to do more easing. If it doesn’t – well, yen will surely strengthen. For more details see our special article.

• Europe: Leaders of the EU 27 member states will assemble in Brussels for a crisis meeting. New French President François Hollande will try to push the currency union from austerity to growth promotion and make Germany agree to the euro bonds – debt issued for the euro zone as a whole.

• Great Britain: MPC meeting minutes. According to the forecasts, the MPC officials have voted unanimously to keep the monetary policy unchanged. Retail sales in April are forecasted to decline by 0.5% vs. a 1.8% growth in March – that would be a very bad sign indicating that the condition of the recessed UK economy aren’t improving at all.

• Canada: Core retail sales in March may grow by 0.6% compared with a 0.5% increase in February. The nation’s economy for now seems stable enough.

• U.S.: New home sales are also expected to increase to 336K in April vs. 328K in March.

Thursday, May 24:

• New Zealand: April trade balance is to be released (134M trade surplus in March), while the government will make its annual budget statement.

• China: May HSBC flash manufacturing PMI will be released (in April the index reached 49.3, indicating the industry contraction).

• Euro zone: According to forecasts, French flash manufacturing and services PMIs in May are likely to increase to 47.1 and 45.9 respectively (however, the reading below 50.0 still indicates industry contraction). German flash manufacturing PMI is forecasted to reach 47.2, while the services one – to decline to 51.9 from 52.2. Euro zone’s flash purchasing managers’ surveys are expected to show a 10th successive monthly decline in manufacturing output (46.1) and a fourth successive fall in services (47.2). German Ifo business climate in May is expected to go down to 109.5 from 109.9 in April, indicating that concerns of entrepreneurs have risen on the back of the extending crisis. Later in the day, ECB president Mario Draghi is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.

• Great Britain: Britain’s revised GDP in is expected to confirm that the economy shrank 0.2% in Q4 after having declined by 0.3% in Q4 2011. The release of a preliminary GDP showed that UK is in a technical recession – a second consecutive quarterly decline. If the final GDP remains unchanged, the downward pressure on the sterling will grow. New QE is becoming more and more likely; last week a dovish inflation report was issued. The BoE Governor Mervin King sounds rather pessimistic: according to him, the euro zone is tearing itself apart.

• U.S.: Core durable goods orders in April may increase by 1.3% vs. a 0.8% fall in March. Number of weekly unemployment claims is forecasted to reach 374K after the previous reading 370K

Friday, May 25:

• Japan: Tokyo Core CPI is forecasted to decline by 0.5% in May, while national – to grow by 0.1%.

• Euro zone: GfK German consumer climate, which is an important indicator of consumer spending, may increase to 5.8 in May from 5.6 in April.

BarCap: USD/CAD made bullish reversal

Can’t stop wring about USD/CAD today. Technical analysts at Barclays Capital note that what we are seeing on the pair’s chart is bullish reversal. Look yourself: this week the greenback managed to overcome resistance of 1.0051 (the upper border of the trading range since the end of January), $1.0062 (200-day MA) and 1.0097 (7-month downtrend resistance line).

According to the specialists, resistance levels have shifted upwards to 1.0159 and 1.0319 (2012 maximum). Support is now provided by the former resistance levels in the 1.0090 and 1.0050 areas and at 0.9978 (April 23 maximum). Barclays Capital says that the bearish trend reversal will occur only if USD/CAD closed below 0.9899 (uptrend line support, see the chart).

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Chart. Daily USD/CAD

Nomura: fx majors amid risk aversion

According to analysts at Nomura Capital, the greenback and the Japanese yen are likely to strengthen as “safe havens” if Greek elections in June take no effect and the country exits the euro zone. In the second half of the year specialists expect EUR/USD to decline to $1.15, while EUR/JPY may fall to 80.00 yen. Nomura specialists expect GBP to remain the strongest among the European currencies.

In the risk-off market mode commodity currencies will remain under unrelenting pressure. AUD/USD is expected to trade below parity in 2012. USD/CAD may climb to C$1.05 in Q3, while NZD/USD in Q2 is likely to depreciate to $0.72, according to Nomura forecasts.

ECB is likely to launch new round of QE if debt crisis extends; the key interest rate is expected to remain at 1.00%. Specialists point that the ECB policy, based on fiscal tightening, financial deleveraging and overly tight monetary policy, is gradually pushing the euro zone into recession.

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Photo: The Telegraph

Commerzbank: EUR/GBP may get higher

The latest euro’s swing down versus British pound was lasting since the end of February. This week EUR/USD tried start rebounding after the Bank of England expressed concerns connected with the situation in the euro area.

Technical analysts at Commerzbank point out that euro managed to overcome an important psychological resistance at 0.8000 – a positive signal. Moreover, there’s a divergence of the daily RSI (12) confirming the idea of corrective rebound, while MACD has crossed the signal line bottom-up on the daily chart.

The specialists note that resistance lies at 0.8090 (downtrend resistance line) and 0.8221 (April 25 maximum), while support is found at 0.7950 (May 16 minimum) and 0.7795.

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Chart. Daily EUR/GBP

Commerzbank: comments on EUR/USD

The single currency keeps sliding versus US dollar. Technical analysts at Commerzbank note, however, that there are bids in the $1.2660/70 zone, so the bears have so far been unable to pull the pair much lower. The specialists think, however, that soon they’ll ultimately succeed and EUR/USD will drop to $1.2624/1.2530 (January minimum, 78.6% retracement of the pair's advance from June 2010 minimum to may 2011 maximum), then rebound to $1.2911/82 before another decline.

There was no significant bullish correction in the last 3 weeks, so selling on rallies remains the preferred strategy. The situation will become more neutral if euro manages to crawl above $1.2758 (May 16 maximum).

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Chart. Weekly EUR/USD

CAD may slide to a 2-year low

According to strategists at Scotia Capital, USD/CAD may surge if the volatility grows.

Analysts advise to look out for the Volatility Index (VIX), which is the key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. According to specialists, USD/CAD has chances to rise to C$1.0800 in a long tearm, because yesterday the VIX index closed at 24.49 (above the critical 23.5 level).

Economists have trimmed expectation of the Bank of Canada’s rate hikes this year as the nation’s economy is affected by weaker US data. The loonie fell on Thursday even despite the positive manufacturing and wholesales data releases. Watch Canadian CPI release later today: the pace of consumer prices’ growth is expected to decline.  

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SPX Volatility Index

Source: Yahoo finance

RBC Capital: comments on USD/CAD

According to analysts at RBC Capital Markets, U.S. dollar is expected to strengthen further against the Canadian currency. The pair USD/CAD broke C$1.0097 and C$1.0159 resistance levels and now may rise to C$1.0319, reaching a 2012 maximum.

Analysts believe the pair must fix below C$0.9899 to reverse current bullish trend. However, it’s unlikely to happen: the risk aversion has increased this month amid concerns the sovereign-debt crisis will worsen.

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Chart. Daily USD/CAD

Greece: at the political battlefront

Rating agencies are quite active these days: we have Italian and Spanish banks downgraded and Greece. Fitch Ratings cut Greece’s rating from B- to CCC due to “the heightened risk that Greece may not be able to sustain its membership of EMU”.

Fitch warned that the other euro zone nations also risk getting worse estimates: the agency pledged to put the entire zone on downgrade watch if after June 17 elections in Greece “Fitch assesses that the risk of a Greek exit from European Monetary Union is probable in the near term.”

A non-political caretaker Greek government took over on Thursday to oversee fresh national elections on June 17. The IMF said it would not resume contacts over the 130 billion euro bail-out until the new government is in power. The June vote is regarded as a referendum on the country’s membership in the euro area.

Alexis Tsipras, the leader of the Radical Left coalition (SYRIZA), claimed that he would never yield to European demands to impose “barbaric” austerity. At the same time, the latest poll showed that Greek voters are returning to the parties which stick to euro: the conservative New Democracy party may expect to have 26.1% of votes versus 23.7% for SYRIZA (first place means 50 extra seats in the 300-seat parliament). Together with the Socialist PASOK party New Democracy would have enough seats to form a pro-bailout government. However, it’s too early to breathe with relief: political experts say that voters are still far from enthusiastic with New Democracy and many things may happen in a month before elections.

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Alexis Tsipras, the main inspirer of Greek radical forces, 37 years old. Photo from anphoblacht.com

Analysts agree: AUD will suffer more

On Monday Australian dollar dived below the parity versus its US counterpart. Analysts say it will stay down there for a time being.

NAB reduced forecast for AUD/USD in September from $1.0200 to $0.9800 due to negative domestic factors. The specialists think that the Reserve bank of Australia will cut borrowing costs 2 times more by 25 bps each time and possibly more if the economy keeps deteriorating. Australian federal budget, announced last week, will lower the nation’s GDP growth in the year to June 30 by a percentage point (the RBA cut benchmark rate by 50 bps to 3.75% on May 1: the nation’s economy added 2.3% last year).

CBA lowered AUD forecast from $1.0800 to $0.9800 by June and from $1.0900 to $1.0500 by December citing the same reason for the revision – fiscal contraction and interest-rate cuts.

ANZ underlines that without positive news from China or Europe, AUD/USD rebounds will allow for tactical shorts to be built for a series of technical targets at $0.9850, $0.9600 and $0.9400 before a long-term base develops.

UBS says that the bias for AUD/USD is clearly bearish. In their view, the pair will to trade at $0.9800 in the coming weeks.

Westpac cut AUD/USD forecast from $1.0200 to $0.9800 by September keeping the year-end at $1.0400.

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Chart. Daily AUD/USD

Analysts: outlook for GBP

Analysts at Barclays Capital expect EUR/GBP to continue the downward movement. Even though the sterling was hurt by the dovish inflation report on Wednesday, the pressure on the common currency these days is incomparably higher. Analysts at Barclays Capital and ING forecast the EUR/GBP to decline to 0.76 and 0.75 respectively in a 12-month period.

However, analysts at HSBC don’t believe the sterling is so impregnable. Even in calm market conditions most analysts expected sterling to stay firm against the euro, but to weaken against the greenback. If the risk aversion grows further, investors will turn to the greenback – the real safe haven these days. Great Britain has already slipped into recession; in case if UK data worsens (either slowdown in growth or dip in inflation), the sterling will collapse on a possibility of a further QE. Strategists at RBS forecast GBP/USD to be at $1.57 by the middle of the year.

Watch out for important UK data: public sector net borrowings and inflation letter (May 22) and the MPC meeting minutes (May 23).

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Chart. Daily EUR/GBP

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Chart. Daily GBP/USD

ECB also started seeing the risks

As the tensions in Europe strengthened, even the European Central Bank dadmitted that the situation’s becoming too dangerous.

The ECB President Mario Draghi announced yesterday that it will temporarily stop lending to some Greek banks to limit its risk. Draghi said that until the banks in question sufficiently boosted their capital, the responsibility for lending to them will be shifted to the Greek central bank (within so-called Emergency Liquidity Assistance). Earlier ECB President acknowledged for the first time that Greece could leave the monetary union.

Greece’s four biggest banks are waiting for European Union’s approval to receive 18 billion euro of bonds issued by the HFSF (Hellenic financial stability fund) for their recapitalization.

Commerzbank: “With market tensions mounting and contagion effects running their course, the ECB might however not be left with much of a choice in the end as capital flight from periphery countries could even accelerate if the probability of a “Grexit” rises. Against this background, the recent EUR/USD rebound is unlikely to be more than a short gasp for air”.

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Image from brecorder.com

Spain: bond auction results

Spanish government has managed to sell 2.49 billion euro in bonds out of 1.5-2.5 billion euro target. Such figures may be regarded as an achievement in the current climate. The costs, however, turned out to be high enough. As you may see below, the yields increased in comparison with previous auctions.

- April 2016 bond: average yield 5.106% from previous 3.374%;

- July 2015 bond: average yield 4.876% from previous 4.037%;

- January 2015 bond: average yield 4.375% from previous 2.890%.

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Photo: EPA/AP

Barclays Capital: comments on AUD/USD

According to analysts at Barclays Capital, a combination of global and domestic factors pulls AUD/USD below parity. However, in a short term the Aussie may enjoy a rally on the back of the postponed Greek elections and the softening tone of EU pro-austerity leaders.

Specialists at Barclays Capital lowered their monthly forecast for AUD/USD from $1.0400 to $0.9600. They also cut their three-, six- and twelve-month forecasts to $0.9900, $1.0100 and $1.0200 respectively. Analysts believe the cross will get a yield-support after the middle of June.

According to technical specialists, the pair may touch its 1.5-year lows in the $0.9385/0.9655 area in the medium term. The cross is still trading below the 50-,100- and 200-day MAs and below the daily Ichimoku Cloud.

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Chart. Daily AUD/USD

Commerzbank: bearish view on NZD/USD

Technical analysts at Commerzbank are bearish on New Zealand’s dollar versus its US counterpart.

The specialists note that NZD/USD is now hovering above support at $0.7607 (78.6% Fibonacci retracement of the pair’s advance from November to February). In their view, this support is likely to be breached soon and kiwi will start moving down targeting $0.7168 (200-week MA) and $0.7116 (2011 minimum) in the medium term.

According to the bank, resistance for New Zealand’s currency is situated in the $0.7774/0.7792 area (January 6 minimum, 61.8% Fibonacci retracement). The pair will find itself under bearish pressure as long as it’s trading below these levels.

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Chart. Daily NZD/USD

Analysts: outlook for EUR/USD

The euro rebounded, paring a four-day decline against the dollar, as the currency’s 14-day relative strength index (RSI) fell to 22 yesterday, below the 30 level that some traders see as signaling an asset may reverse direction.

Analysts at Bank of America are strongly bearish on EUR/USD in a long term, but expect a little upside correction these days. They recommend entering the trade at $1.2800 with a stop at $1.2870 and targeting at $1.2520. According to analysts, the pair may reach the target price in a week or two.

Strategists at Danske Bank see EUR/USD at $1.2500 in one month time (forecast revised from $1.2900). In their view, the crisis dynamic is highly uncertain and a significant bigger move lower cannot be ruled out.

According to CBA specialists, the euro will be falling gradually due to the time-expanded Greek issue: new elections will be held in a month, but there is no guarantee of a positive outcome.

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Chart. Daily EUR/USD

Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2790, $1.2800, $1.2850, $1.2900, $1.3000;

GBP/USD: $1.5850, $1.6100, $1.6200;

EUR/GBP: $0.8085, $0.8060, $0.8085;

USD/JPY: 79.50, 79.75;

USD/CHF: 0.9350;

AUD/USD: $1.0100.

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Image from pakcricforum.com

What to expect from the next BOJ meeting?

It seems that the USD/JPY market has no idea where to go – upwards or downwards? The central bank may be hoping to refrain from easing this month in order to have enough firepower in case the euro area goes really bad. Such assumption looks sensible due to the positive data released today: Japan’s preliminary GDP expanded by 1.0% in Q1 after staying unchanged in the final 3 months of 2011.

Dai-ichi Life Research Institute underlines, however, that “the timing of further monetary easing would depend more on (global) financial market movements than on the real (Japanese) economy.” So, everything is about how Japanese monetary authorities estimate the European risks.

At the same time, with all the talk about further monetary stimulus a remarkable thing happened yesterday: the BOJ failed to meet its target for bond buying for the first time since the asset-buying program was launched in 2010. That means that the central bank’s powers aren’t infinite after all. If that happened again the BOJ will have to widen the range of securities which it’s buying under APP adding bonds with longer maturity.

So, next week we’ll likely hear more reassuring comments from the BOJ officials about the central bank’s readiness, but in reality monetary authorities will be careful. The key interest rate will stay unchanged at 0.1%. The BOJ may ease in July when it conducts a quarterly review of its economic and price projections as it may acknowledge that deflation threat is subsiding too slowly.

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Chart. Daily USD/JPY

May 17: economic background

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According to FOMC meeting minutes, released on Wednesday, several Fed policymakers said the additional QE may be needed if the economy falls back. In April the central bank said interest rates will stay near zero till late 2014 in order to support the economy. Analysts at CBA claim that the greenback may now “start to stabilize rather than continue to rocket higher”.

In Greece Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, was sworn in as head of the caretaker administration. The date of new elections will be announced after the parliament formed according to May 6 election results is sworn in today and then dissolved.

EUR/USD recovered from the 4-month minimum at $1.2680 hit yesterday to the levels around $1.2745. Risk sentiment was slightly better this morning. Australian and New Zealand’s dollars edged higher versus its US counterpart.

Japan’s preliminary GDP expanded by 1.0% in Q1 close to forecasts, following a flat reading in Q4. Figures reveal that domestic consumption and government outlays for reconstruction are boosting the economy. Gradual growth is expected to continue; however, the further deterioration of the situation in Europe may affect the export-dependent Japan.

Also today:

• Euro zone: Banks in France, Germany and Switzerland will be closed because of the national holidays. Spain holds a 10-year bond auction

.• US: The number of unemployment claims fixed last week may grow by 368K vs. the previous print 367K. Philly Fed Manufacturing Index is forecasted to rise to 10.6 in May. Philadelphia region manufacturers' index declined more than expected in April reaching 8.5 from 12.5 in March, demonstrating the biggest drop in 6 months. However, most analysts believe that improved consumer spending will provide further growth to the manufacturing sector.

French & German auctions: yields declined

German bond yields fell to 1.47% from previous 1.77% at today’s auction as the Greek problems increase demand on safe assets. However, Germany fell short of the targeted amount (4.1 billion euro vs. expected 5 billion).

On a French bond auction yields eased to 1.72% from 1.83% a month ago, showing the markets feel increasingly comfortable with growth-oriented policy of Francois Hollande. France managed to sell 7.9 billion euros out of 7-8 billion expected.

On Wednesday EUR/USD has reached a four-month low. However, the cross is trading in the green ahead of the FOMC meeting minutes. Resistance for EUR/USD lies at $1.2747 (May 16 maximum), $1.2800, $1.2822 (Lower Bollinger) and $1.2870 (May 15 maximum), while support – at $1.2648 (Jan.17 minimum), $1.2624 (Jan.13 minimum), $1.2600 and $1.2588 (Aug. 2010 minimum).

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Chart. Daily EUR/USD

Hard job for the Bank of England

On Wednesday sterling fell to a four-week low after the BoE inflation report showed the prospects for UK GDP growth are “unusually uncertain”.

According to BoE, the economy may grow by about 0.8% this year vs. previously expected 1.2%. The inflation is likely to stay above the 2% target at least in the next year. Weak growth and high inflation make the choice of monetary instruments difficult for the MPC.

The euro zone’s debt crisis threatens expansion despite the loose monetary policy is supporting the economy. The BoE governor Mervyn King said the euro area “is tearing itself apart without any obvious solution”. According to King, if the situation in Europe deteriorates, the bank will "react in many ways" (QE).

Morgan Stanley: “The increased magnitude of the euro crisis will likely hit the pound via economic second round effects. While the pound should still maintain its medium-term advantage against the euro, there is increasing evidence that the pound has topped against the US dollar.”

BoE Inflation Report (May 2012)

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Photo: Guardian

RBS: don’t rush into EUR/USD shorts

Analyst at RBS recommend investors (especially those who currently don’t have position at this market) to take a “wait & see” approach trading EUR/USD.

In their view, it’s now too late to rush in the current bearish trend – better to wait until euro tests $1.2624 (2012 minimum, target from the “head and shoulders” pattern) and see whether it holds or gets broken. If the support is breached, the single currency will be vulnerable for a decline to $1.2329 (2008 minimum).

As for resistance, it’ situated, according to the bank, at $1.2774, $1.2933, $1.3004 (2 previous monthly lows and the pattern break down area) and $1.3092.

http://www.fbs.com/sites/default/files/image/analysis/May2012/16_05_12/daily_eurusd_15-26.gif

Chart. Daily EUR/USD