EUR/USD Forecast: Euro Reaches Parity

I’ll be looking for opportunities to short this market, and may even do so at parity, with a small position and then add if it starts to work out.

  • The EUR/USD currency pair has recovered during the trading session on Tuesday to reach the parity region.
  • This is an area that’s going to cause a lot of noise, and I suspect that there will be quite a bit of resistance.
  • The 50-Day EMA is sitting right here and has acted pretty much like a descending trendline for quite some time.

Euro Still In the Midst of a Strong Bear Market

Because of this, I think that we will have to wait and see how things close after the session on Wednesday, and it’s probably worth nothing that the jobs number comes out on Friday, which may pull liquidity out of the market. At this point, a lot is riding on the hope that the Federal Reserve will step back from its monetary tightening policy, due to the Reserve Bank of Australia raising rates “only 25 basis points” during the evening. The Federal Reserve has shown absolutely no proclivity of slowing down his tightening policy, so it would not take much to spook the market back into reality. I do not think that the euro has much further to go, and it is most certainly overbought at this point. There is a lot of noise between here and a 1.02, so I suspect it is only a matter of time before we get the exhaustion needed to start shorting.

The European Central Bank is going to continue to fight multiple issues at the same time, not the least of which would be the war in Ukraine and its effect on the supply chain in the EU. Energy issues are still going to be prevalent, with Germany suggesting that the country will have to cut back 20% of its normal natural gas usage in order to get through the winter. If that is true, the reality is that a lot of industries are going to have to shut down. This knee-jerk reaction in the market is clearly based on a lot of hope, and not a lot of reality.

Because of this, I’ll be looking for opportunities to short this market, and may even do so at parity, with a small position and then add if it starts to work out. Markets get out of sorts like this occasionally, especially when you are in the midst of a strong bear market. With that, I still believe this is simply a “bear market rally.”

EUR/USD chart

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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.