EUR/USD Forecast: Euro Breaks Above Parity

At the first signs of exhaustion you may have a fabulous shorting opportunity.

The Euro has broken above parity, and it looks like we are in the midst of some type of serious move to the upside. Whether or not we are going to continue to go higher is a completely different question, but it certainly looks as if we are trying to turn things around. It’s worth noting that the Bank of Canada raised interest rates by 50 basis points instead of the expected 75, so now everybody is naturally going to extract that as a sign that the Federal Reserve may do the same. I think that is a real stretch, but the short term markets are clearly breaking out and going higher yet again.

Is It Time to Buy the Euro?

  • Now that we are breaking above this area, you could make an argument for a “W pattern”, and it is of course very possible.
  • If that were to actually be the case, we could go as high as 1.04 in the short term.
  • I don’t like buying the Euro, but if the market is going to continue to guess as to what the central banks are doing, they may very well convince themselves to go higher.

I’m very cautious about that, because I do recognize that all it’s going to take is the statement next week coming from the Federal Reserve to squash this yet again. The Federal Reserve is likely to raise interest rates by 75 basis points next week, but the question is going to be more or less what the statement is. I anticipate that the Federal Reserve chairman will have to explain to everybody that he’s dead serious about raising rates yet again.

The size of the candlestick for the trading session obviously is strong, and it could suggest that perhaps we have further to go. However, I think we also have to be cautious, because although it’s been very strong recently, the Euro has a huge amount of negativity behind it, as the European Union continues to worry about energy and growth in general over the course of the winter. Although this has been a very bullish move, we still have a long way to go before we change the overall attitude of the market. Looking at this chart, you need to keep in mind that you should be willing to be flexible, and that the first signs of exhaustion you may have a fabulous shorting opportunity.

EUR/USD Chart

Ready to trade our daily Forex analysis? We’ve made a list of the best brokers to trade Forex worth using.

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.