EUR/USD Forecast: Euro Like a Falling Knife

Christopher Lewis

This is a market that will continue to see a lot of downward pressure, so even though it has been so negative, it is likely that sooner or later we will get a bounce.

The euro broke down significantly on Wednesday to slice the 1.12 level, showing that we are going to continue to go much lower. At this point, if you try to buy the euro, it will be a lot like “catching a falling knife.” I think that the 1.10 level will be targeted, and I am just as surprised as anybody else that we may get there quicker than I could have ever imagined.

At this point in time, any rally that occurs in this market should end up being a nice selling opportunity. I would love to see a couple of days that were green, and then a relatively exhaustive-looking candlestick. At that point in time, it is very likely that sellers will jump back in to take advantage of “cheap US dollars”, something that we will continue to be looking for. The 1.10 level is a major, round, psychologically significant figure, and a lot of people will pay close attention to it. Ultimately, this is a market that will continue to see a lot of downward pressure, so even though it has been so negative, it is likely that sooner or later we will get a bounce.

The 1.14 level above would be a significant barrier and is not until we clear that area that I would look at this as a market that was ready to turn around. Whether or not we can break down below the 1.10 level will be interesting, because that could define whether or not we completely crash. The US dollar has been rallying against almost everything, so it makes sense that the euro will continue to get bashed, perhaps due to the fact that it is considered to be the “anti-dollar.” The European Union continues to see lockdowns and coronavirus numbers climb. If that is going to be the case, then it is very likely that the economy in the European Union will continue to wilt as a result. With the Federal Reserve looking to taper bond purchases going forward, it makes sense that the interest rate differential alone will continue to push this market lower. As long as that continues to be the case, there is no reason to think that we will turn things around.

EUR/USD

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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