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Bearish Breakdown Will Put $1.05 in Sight

I think you’ve got a lot of volatility coming, but in the short term we may get a little bit of a bounce to help set up a nice selling opportunity.

  • The EUR/USD currency pair initially tried to rally during the trading session on Wednesday, but gave back gains as we got to the top of the previous trading sessions range.
  • Ultimately, this is a market that is trying to determine what it’s going to do with the 50-Day EMA, and the 1.08 level above.
  • We are squeezing at the moment, and a lot of this will come down to interest rate differential, and of course the fact that there are a lot of concerns out there when it comes to global growth.

The USD Is More Attractive Than the EUR

The Euro suffers at the hands of a lack of forward momentum in the economy, and of course the fact that we have seen interest rates in the United States rise. The Federal Reserve continues to be very tight with its monetary policy, which makes the US dollar a bit more attractive. Whether or not that continues remains to be seen, but at this point it looks like there’s a lot of fear out there when it comes to the overall global economy, so it does make quite a bit of sense that we would see the US dollar be attractive, as people are trying to do everything they can to protect themselves from a potential global slowdown. If we break down below the 50-Day EMA, I see nothing to stop us from going down to the 200-Day EMA. The 200-Day EMA sits right around the crucial 1.05 level, so it will obviously attract a lot of attention. In that environment, you certainly would have a lot of headlines.

Anything below that area opens up the possibility of a move all the way down to parity, but I’m not necessarily thinking that’s going to be the case, at least not in the short term. With that being the situation we find ourselves in, I think you’ve got to look at this through the prism of fading rallies if we see signs of exhaustion after bounces, but also you need to pay close attention to the 1.10 level above, which could certainly be thought of as major resistance. With that being the case, I think you’ve got a lot of volatility coming, but in the short term we may get a little bit of a bounce to help set up a nice selling opportunity.


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