The EUR/USD pair fell during the session on Monday, testing the 1.08 handle. This is an area that has been somewhat supportive and a minor sense lately, and I believe that if we can break down below there we will in fact see the market fall away to the 1.05 handle. Once that happens, the market is free to test that area and perhaps head to parity.
I have a yellow box marked on this chart that for me signifies a significant amount of resistance. I believe it is not until we get well above that yellow box that we can begin to think about buying the Euro, as there are so many different things working against the value of that currency. Going forward, I don’t really see any reason why a parity isn’t achieved, but it certainly won’t be easy. Without a doubt, the easy money has already been made as far as shorting this market is concerned.
Selling rallies
The only strategy that I have seen working recently has been selling short-term rallies. Yes, we have had a significant bounce of 500 pips, but in the end this is a marketplace that continues to look very soft. I believe that the breakdown should continue given enough time, and as a result I am very patient about waiting for resistive looking candles. I have no interest in buying, simply because I think that there are far too many moving parts out there to consider the Euro a viable currency.
I believe that the Euro will continue to fall against most currencies, but the US dollar looks particularly strong. The US Dollar Index continues to show signs of taking off to the upside, and I feel it’s only a matter time before that market reaches the 100 level, which of course should be a significant barrier based upon the large, round, psychologically significant number. Is because of this that I feel that the move coincides with a move in this pair down to the 1.05 handle, and that it might take a couple of attempts to break down below that barrier.
