EUR/USD Forecast: Euro Breaks Through a Major Support Level

Christopher Lewis

This market will continue to be volatile, so you should keep an eye on your position size and make sure that you protect yourself.

The Euro has broken below the crucial 1.05 level, an area that will attract a lot of attention. The 1.05 level has been important for several weeks, but the Euro finally broke through it to show signs of negativity. After that, the market sliced all the way down through the 1.04 level underneath there, and it looks like we are ready to go much lower. This is rather impressive considering just how massive the move in the US dollar has been across-the-board. The Euro of course is suffering at the hands of a weakening European Union economy, and the bonds in Europe shrinking quite drastically in the face of stronger American yields.

I am more than willing to short this market on any type of rally and will not hesitate to act as soon as I get the opportunity on an exhaustion candle. That exhaustion candle opens up the possibility of a move lower as it is likely going to continue to see a lot of volatility. Remember, when people are concerned they typically will run away from anything along the lines of risk appetite, and although the Euro is not necessarily “risky”, it certainly is further out on the risk profile than the US dollar is.

If we were to break above the 1.05 level, I suspect that there is a massive amount of resistance all the way to at least the 1.06 level. If we were to break above there, then the next barrier is going to be in the neighborhood of the 1.08 level, where the 50 Day EMA is currently breaking through. That is an area that was previous support so I do think it is probably only a matter of time before the sellers would treat that as resistance.

It would take a Herculean effort to turn the entire trend around, and the fundamentals simply do not favor that type of move. If you are patient enough, you should be able to pick up “cheap US dollars” on every rally. Parity is a reality at this point, something that is a bit difficult to imagine as it has been so long since we have been all the way down there. However, this market will continue to be volatile, so you should keep an eye on your position size and make sure that you protect yourself.

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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