The EUR/USD pair fell during the course of the session on Thursday, crashing through the 1.15 level again and making a fresh new low. This of course has a lot to do with the fact that the European Central Bank expanded its quantitative easing program, which of course brings down the value the Euro in general. As they buy more bonds, it will create less demand for Euros, thereby bring down the value of the currency itself. In theory, that should help exports and boost the European Union economy, but at this point in time the easiest way to look at this is that there is a massive divergence between the two central banks.
The Federal Reserve of course has step away from quantitative easing altogether, so having said that we should see more demand for US bonds than European ones. This will be because there is more interest to be had in the United States, and that of course causes more money to flow into that country in relation to the European Union itself.
Ultimately, this candle looks very negative, and now that we have broken below the 1.14 level and to a fresh, new low, we believe that this market will ultimately go down to the 1.10 level given enough time. With that being the case, we are selling rallies as they appear, and looking at every simple sign of resistance as an invitation to sell this pair as it should represent value in the US dollar. The US dollar is by far the strongest currency in the world, and that of course isn’t going to change overnight. Ultimately, the pair will chop around them time to time, but given enough time for longer-term should be to the downside without too many issues.
As far as buying this pair is concerned, I would need to see some type of longer-term supportive candle or perhaps a break back above the 1.20 level, something that does not look very likely to happen anytime soon in this extraordinarily bearish market. We believe that the downtrend should be in effect for quite some time.