EUR/USD Forecast: Hold Off on Buying Right Now

Christopher Lewis

This is a market that you should continue to fade short-term rallies that show signs of exhaustion. 

The Euro initially tried to rally during the trading session on Wednesday but gave back the gains to form a bit of an inverted hammer. This inverted hammer could send this market down towards the 1.16 level, a target that I have been talking about for some time. That is the next major support level that I think a lot of people will be looking towards, especially now that we are seeing even more concerned about a lockdown coming out of France.

The Euro is going to continue to suffer at the hands of an inept government that seemingly have no idea what to do about vaccinating its own people, and of course the fact that bond yields in the EU are much lower than in places like the United States. The US dollar has been strengthening for some time, so it does make sense that we would continue to see this downward pressure. With that being said, the 200 day EMA above continues to offer resistance, and an area that previously had been supportive. Because of this, I think that the market is going to continue to sell short-term rallies, at least until we test that crucial 1.16 level.

To the upside, breaking above the 200 day EMA could open up a move towards the 1.19 level, which is an area where we have seen a lot of selling pressure, and of course coincides with the previous uptrend line that had been so important for the marketplace. I do not think that happens anytime soon, but it is most certainly worth noting that the area exists, and therefore we need to pay close attention to it.

If we were to turn around a break down below the 1.16 handle, then I think there might be a little bit of psychological support at the 1.15 handle but breaking down below there would open up a move down to the 1.12 level over the longer term. The market participants continue to favor the greenback, and as long as the 10 year yields continue to rise, I just do not see how this changes anytime soon. Ultimately, I do believe that this is a market that you continue to fade short-term rallies that show signs of exhaustion. The buying of this market is something that I am not looking at any time soon.

EURUSD

Christopher Lewis

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.

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