The EUR/USD pair has been falling rather significantly for some time now. The last couple of weeks have been somewhat consolidative though, so that being the case it appears of the market will more than likely try to break down and continue much lower. I look at this market is one that is absolutely broken, and quite frankly it’s only the “psychological significance” of the 1.25 level to keep the market somewhat afloat.
I think that the fact that we have broken below the 61.8% Fibonacci retracement level at the 1.28 level tells me that the market should continue to go lower, and make a “round-trip” all the way to the beginning of the uptrend out the 1.2050 level. That being the case, the market to me is one that should be sold every time it rallies, and it is not until we get above the 1.30 level that I think it’s even possible to consider buying this market for any real length of time. Any buying opportunity between now and then will be short-term at best, and probably foolish to say the least.
European Central Bank
I think a lot of pressure on the European Central Bank will finally force it to loosen its monetary policy in general. I think that the fact that the Federal Reserve is starting to step away from the quantitative easing game will continue to push this pair lower, and although there is a significant amount of support at the 1.25 level, I anticipate that it gets broken this month.
I don’t know that we go below the 1.20 level though, because quite frankly it’s a pretty significant area on the longer-term charts as well. I don’t really see an opportunity for selling below there, but you never know. At this point in time, that is my longer-term target am not too concerned about anything below there. I think that if we get below the 1.25 level on a daily close, we could see an acceleration of selling, meaning that we could get to the 1.2050 level much quicker than many of you expect.
