The EUR/USD pair fell during the session on Friday, testing the 1.05 level yet again. This is an area that has been supportive over the last couple of sessions, but ultimately we believe that this market is only going to find minor support in this area. With that being the case, we believe that this market is going to continue to go much lower. However, we could get a bit of a bounce from here but that just simply looks like it would be an offer to sell yet again. After all, represent value in the US dollar and we are most certainly in a downtrend.
Above this area, we see the 1.10 level as massively resistive, and as a result we believe that as long as there is pressure in that area, every time we rally the sellers should step back into the marketplace. However, by the way the Friday session turned out, we could see a breakdown at this point. Ultimately, we feel that this market cannot be bought, because even above the 1.10 level we would see a lot of selling pressure also. In other words, there’s just simply no way whatsoever that we can buy this market unless of course we get a longer-term buy signal.
We believe that this market should then head to the parity level, which is the next major support barrier. On top of that, there is plenty of reasons the think that the European Union will continue to suffer with deflationary headwinds, as well as a loose monetary policy out of the European Central Bank. In fact, the ECB is probably stuck at this point in time as the monetary policy will have to stay very loose for the foreseeable future. Adding more pressure to the pair is the fact that the US dollar continues to strengthen against almost anything and everything, and also as the Federal Reserve is exiting any signs of quantitative easing. In fact, we believe that this pair will continue to be one that sells off over the longer term. In the meantime though, we are only looking for parity.
