The EUR/USD pair went back and forth on Friday, ultimately printing a slightly negative candle. With this, looks like we are ready to continue drifting a little bit lower, and I still believe that the 1.06 level is a bit of a magnet for price. Because of this, it should continue to see bearish pressure in this market and we should continue to go lower, but expect quite a bit of choppiness. I believe that the 1.05 level is the target, and at that point in time I would anticipate that there would be some type of bounce.
I believe that rallies at this point in time should be nice selling opportunities, as there is a lot of noise between here and the 1.08 handle at the very least. A resistive candle above would be a nice selling opportunity as it would represent “value” in the US dollar as the Euro continues to struggle in general. Keep in mind that the European Central Bank has suggested that further stimulus could be coming, and that of course will work against the value the Euro in general. However, you also have to keep in mind that the Federal Reserve may have to raise interest rates, so that makes this a bit of a perfect set up at this point in time.
Selling Rallies, Selling Breakdowns
I believe that every time this market rallies, it you have to look for resistance in order to start selling. The aforementioned strategy is bolstered by the fact that we have an uptrend line that had been broken below recently. That uptrend line should now be resistive, which crosses at roughly the 1.10 level now. Between that and the large, round, psychologically significant number, it’s very easy for me to imagine selling this pair again and again.
If we can break below the 1.05 level, this market could then head towards the parity level, but it will take quite a bit of time to get down there. Keep in mind that we are starting to reach the least liquid time of the year, so volatility could drop off.
