EUR/USD Forecast: Moving Towards Resistance

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The Euro rallied during the trading session on Thursday, reaching towards significant resistance at the 1.13 level late in the day as it was revealed that the Iranians were willing to make significant concessions on the nuclear talks. This of course is good news for the market and therefore people sold off US bonds, meaning that the dollar fell in strength. This isn’t necessarily some type of statement on the validity of the Euro or the European Union economy, rather it is more of a “risk on” move.

Looking at the chart, we have been stuck in a range between the 1.12 and the 1.13 level for some time now, so it makes sense that we stopped right here. The question now is whether or not we can continue to see this type of strength, or if we will simply fade right back into the range. I think at this point it’s likely that we are going to struggle a bit but I do believe it’s only a matter of time before we make some type of significant move. Once we break out of this 100 PIP range, then perhaps you can start to trust the markets a bit, because they’ve had nowhere to be. Both of the central banks look very likely to cut rates soon, or at least do something to loosen monetary policy in the case of the ECB. In that scenario, there’s no real desire to own either currency, as they depreciate against almost everything else.

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Looking at this chart, if we can break above the 1.13 level it’s likely that we could go to the 1.1350 level where I expect to see a lot of resistance there as well. All things being equal, that is my base case scenario but I also recognize that we could turn around and break down below the 1.12 level. If we do that, then it’s very likely that we go down to the 1.11 level, an area that has caused a certain amount of support. Going into the weekend though, don’t be surprised at all if we pull back just a bit fall back into the range, as there has certainly been threats of headlines coming out more than once when it comes to the Iranians and the Americans. With that, I’m cautiously optimistic but I would signify and stress the word cautiously and that statement.

EURUSD

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.