EUR/USD Price Forecast: Euro Breaks Support As Selling Accelerates

The euro continues to see a lot of downward pressure, and therefore, we have seen it break to the downside on Wednesday.

EUR/USD

The euro has crumbled against the U.S. dollar as real interest rates in America continue to rise. Therefore, people are willing to buy U.S. dollar-denominated assets. Interest rates rising in America yet again provide a real rate of return over inflation, so it's a guaranteed gain.

At the same time, you have the Europeans worried about energy and the ECB being fairly noncommittal about interest rate hikes. This, paired up with the idea that the Federal Reserve is likely to raise rates next month and possibly early next year, puts more pressure on the euro. Beyond that, there's been talk of a potential 50-basis-point rate hike next month. We'll have to wait and see if that actually happens.

The downward pressure is a continuation of the selling pressure

As things look right now, it seems like money is flowing into the United States and out of the European Union in general. The downward pressure is a continuation of the selling pressure that we've seen since the beginning of September.

Now that we have cleared the 1.11 level and broken through some of those orders, it's very possible that we could find ourselves going to the 1.10 level, a target that I've had for a while.

Short-term rallies at this point in time, I think, end up being selling opportunities because, quite frankly, you want to own U.S. dollars over the euro in this environment. You get paid to be short, and I think that will continue to be the case here.

It's not until we break above the 1.1350 level that I would be concerned about the trend, and we are light-years from that. We've just broken through the bottom of the consolidation area that we've been in for about six weeks. We'll see if there's any follow-through.