EUR/USD Forecast: Showing Support in Same General Vicinity

Christopher Lewis

The market is likely to continue to punish the US dollar against currencies that represent areas that are starting to come down from the coronavirus and reopen their economies. 

The euro rallied just a bit on Wednesday as we are trying to hang on to the idea of rallying. If we can break above the 50 day EMA near the 1.1375 handle, then I think the market is likely to go higher, perhaps reaching towards the 1.14 handle and then the 1.1450 level. It would also confirm the breakout being retested, which is something that the candlestick from Tuesday put a lot of questions into.

On the other hand, if we break down below both the Tuesday and Wednesday session, it is likely that we could go looking towards the 1.1275 level underneath, which is an area that has been supportive more than once. That is an area that I think breaking through would again open up the "trapdoor”, which could send the euro looking towards the 1.12 level, followed by the 1.10 level. However, something happened during the session that may make that very unlikely. After all, the German Bund managed to go positive as far as yields are concerned, something that we have not seen for almost 3 years. That obviously makes the euro a bit more attractive, despite the fact that the Federal Reserve is suspected of raising rates four times over the next year. In other words, it essentially makes the euro “less bad.”

Another thing to keep in mind is that a lot of traders now are starting to question whether or not the Federal Reserve is going to make some type of major policy mistake based upon a slowing economy and a tightening monetary policy. Because of this, the market is likely to continue to punish the US dollar against currencies that represent areas that are starting to come down from the coronavirus and reopen their economies. The biggest problem with the European Union is the European Union, and its incessant need to lock things down. (Looking at you, Netherlands.) Nonetheless, I do think that the market is trying to look out six months ahead, meaning that the euro is trying to recover. We have a couple of levels to pay attention to and trade off, but longer term I think we’re closer to the bottom at this point in time.

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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