EUR/USD Forecast: Reaches Towards 200 Day EMA

Christopher Lewis

The ECB is likely to increase bond purchases, so that should work against the value of the euro going forward.

The Euro initially pulled back a bit during the trading session on Monday, but then turned around to rally quite significantly. In fact, the market has broken above the 1.18 level, which of course is a very bullish sign. However, the 200 day EMA is sitting just above, and it will of course offer a bit of psychological support. In the candlestick is closing towards the top of the range as well, so that of course is very bullish.

All things been equal, I do think that this is an area that we will see a lot of noise, and therefore it makes quite a bit of sense simply sitting on the sidelines and waiting to see whether or not we can continue to go higher, or if the 200 day EMA is going to offer resistance yet again? A move to the upside that forms a long wick would be what I would use for an opportunity to start shorting, which could send this market back towards the 1.17 level. When I look at these charts, it does make quite a bit of sense that the 1.16 level underneath will be tested, as it is the next major support level.

The size of the candlestick is bigger than many of the other once, so that is a good sign, but at this point in time we had seen so much selling pressure that I think it is likely that people will continue to pay close attention to yields more than anything else, as the 10 year yield in the United States has spiked quite significantly over the last couple of months. If those yields start to climb again, especially if they climb rapidly, that will almost certainly put negative pressure on this market.

If we did break above the 1.19 handle, it is likely that the market goes looking towards the 1.20 handle. The 1.20 level is an area that has been important resistance previously, and of course breaking above there would send this market much higher. I do not necessarily think we are going to see a complete turnaround at this point, but it is worth noting that we are oversold so it does make sense that the spout has happened. The ECB is likely to increase bond purchases, so that should also work against the value of the euro going forward.

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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