EUR/USD Forecast: Consolidating Just Above A Double Bottom

The Euro has fallen during the trading session on Thursday as we continue to go back and forth, with the 1.05 level being a bit of a magnet for price. When you look at the Euro, it’s not difficult to imagine that we could go lower, because quite frankly there’s no real reason for the US dollar to sell off from a longer-term perspective. Granted, the European Central Bank has recently suggested that maybe they will have to do something to help with inflationary headwinds, but at the same time, they have also had an “emergency meeting” to discuss bond rates in Italy.

With all of that noise, it’s not a huge surprise to see this. Going sideways as people try to figure out what the ECB is going to do. We already know that the Federal Reserve is going to tighten monetary policy, so that is part of the reason why the US dollar continues to look attractive. That being said, we also need to look at the global growth situation, and it’s very possible that the economy drops quite drastically, which would work against the value of the Euro as most people will be looking to get their hands on US dollars.

The market continues to be very noisy, and it is worth looking at the double bottom at the 1.04 level as a major level. If we were to break down below that level, then it’s likely that the Euro will drop to the 1.02 level, maybe down to the parity level over the longer term. Alternately, if we were to turn around and take out the 1.08 level to the upside, that could show that the Euro is trying to change the overall trend, and therefore I would have to reevaluate the entire situation. In that scenario, I think the 200-Day EMA would come into the picture.

However, it’s likely that every time this market rallies, there will be plenty of sellers that are willing to jump in and start shorting. As the market continues to fade exhaustion will be something worth paying attention to, and therefore think you will get choppy yet negative price action over the next several weeks. As the session will be on a Friday, it’s going to be interesting to see how it ends up, because it will tell you a lot about how people feel about this currency pair, because what you hold over the weekend says a lot.

(Click on image to enlarge)

EUR/USD Chart

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