EUR/USD Forecast: Euro Collapses Amidst US Dollar Strength

Christopher Lewis

We may get the occasional bear market rally, but that will simply be an opportunity to sell at a higher level yet again.

The Euro has broken down rather significantly during the course of the trading session on Thursday as we continue to see a lot of negativity out there. The 1.12 level being broken through is a very significant turn of events, and as a result it is likely that we could go looking towards the 1.10 level underneath. All things being equal, if the market does bounce from here, it is very likely that we could see plenty of selling based upon the fact that the 1.1225 level had been significant support previously and should be resistance going forward.

The 1.12 level could offer a bit of selling pressure due to the fact that we had bounced from there previously as well, and any type of exhaustion that shows up near that area should be sold into from everything I see. The size of the candlestick is a very negative as well, and therefore it is likely that the markets will find some type of continuation at this point in time. The fact that we are closing towards the very bottom of the range typically means there is a bit of follow-through coming so keep that in mind.

The 1.10 level underneath will be a big target, and almost certainly cause quite a bit of psychological support if nothing else. I do believe that this market is simply a reflection of the fact that the US dollar has been so strong against everything else and more than likely will continue to be. I do not have a scenario in which I would be willing to buy this pair until something fundamentally important changes. We may get the occasional bear market rally, but that will simply be an opportunity to sell at a higher level yet again.

Keep in mind that interest rates in America exploding to the upside while the ECB has absolutely no plans on tighten monetary policy will have an effect on this market as well, so it is likely that the pair will continue to see a lot of negativity. The 50 day EMA above being broken might convince me that the market is going to change, but until I see that I just do not see the path higher, at least not in the short term as we have so clearly broken through major support yet again.

EUR/USD Chart

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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