The EUR/USD pair broke higher during the session on Monday, but managed to find quite a bit of selling pressure near the 1.06 level, and therefore ended up forming a shooting star. The shooting star since just above the 1.05 level, an area that should be a bit supportive. Ultimately though, this is a market that should break down below that level, as the downtrend is so much well developed, and the fact that there are so many massive negative reasons to be short of the Euro. The European Central Bank continues to have to keep monetary policy very loose, and has to fight the specter of deflation. As long as that’s the case, you can expect loose monetary policy, and of course a flight from European bonds. That in turn brings down the value of the currency, and in a situation where the Federal Reserve is leaving quantitative easing for good, this pair will continue to favor the United States.
Selling rallies
I believe that selling rallies will be the way to go going forward, simply because the market cannot seem to hang onto rallies, and therefore it makes a lot of sense that the US dollar will be the only currency that you want to own when it comes to this pair. Top of that, the US dollars stronger than most currencies in general, so when you look at the Euro, it makes sense that this pair continues to go in the same direction.
If we can break below the 1.05 level, this market should then head to the parity level. The 1.10 level above should be the “ceiling”, offering plenty of selling opportunities between here and there. With that, the market looks as if it is one that it’s going to take a very long time to turn the trend around, so quite frankly I don’t see any reason to risk being long at all. With that, I am massively bearish of this market going forward.
