EUR/USD Forecast: Euro Continues Sideways Grind

Christopher Lewis

If we break down below the 1.1225 level, then it opens up the possibility of a move to the 1.12 handle, and then eventually the 1.10 level after that.

The Euro has gone back and forth during the course of the trading session on Thursday, as we continue to grind around the 1.13 level. That is an area that should continue to be of importance, as it is essentially in the middle of the overall consolidation area that we have been in for a while. To the upside, the 1.1375 level has been resistance, and it certainly looks as if the 50 day EMA is trying to drive down through it in order to cause even more resistance.

On the other hand, the 1.1225 level offers plenty of support, and I think it is essentially going to be the “floor the market” in the short term. As we head towards the Non Farm Payroll numbers on Friday and will be interesting to see whether or not this market can finally break out of this rectangle that I have drawn. The market has been very choppy and sideways for a while, and I would not be surprised at all to see that at the end of the day on Friday, we are still very much in this box. Quite frankly, the days of the Non-Farm Payroll announcement decidedly moving a currency in one direction, or the other are long gone, but if there is a major shock, you can get a directional move. Most of the time though, you get a lot of back and forth and then by the end of the day, exhaustion.

Keep in mind that typically “consolidation means continuation”, and therefore you have to look at this through the prism of consolidation after a huge move lower. While that does not necessarily guarantee that you are going to continue falling, the reality is that the market will continue to see plenty of sellers. Ultimately, this is a pair that tends to be very choppy and therefore it is not surprising at all that we have gone sideways for well over a month.

If we were to turn around and break above the 50 day EMA, then the market would almost certainly have the market reaching towards the 1.16 level, as it would be a complete repudiation of the downtrend. On the other hand, if we break down below the 1.1225 level, then it opens up the possibility of a move to the 1.12 handle, and then eventually the 1.10 level after that.

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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