The EUR/USD pair broke back and forth during the course of the session on Friday, as we continue to find quite a bit of volatility in this general vicinity. We believe that the 1.13 level below is supportive, and that the 1.15 level above is resistive. With that, this market looks like it’s going to continue to grind sideways overall, and it’s only a matter time before we should get a continuation of the longer-term downtrend. Ultimately, this market is one that we prefer selling and we look at rallies as potential selling opportunities on short-term charts. However, we also recognize that it’s only a matter time before we break down below the 1.13 level, which of course is a sign that we are going to go much lower, perhaps all the way down to the 1.11 handle.
With the European Central Bank and its ultra-loose monetary policy, it’s difficult to imagine that the Euro will continue to strengthen against the Dollar for any real length of time. With that being the case, it seems as if the market can only be sold and any time it rallies you have to think of it as value in the US dollar. Because of that, we are looking to sell and sell again. Even if we break above the 1.15 handle, we think that there is enough resistance all the way to the 1.1650 level that it is almost impossible to sell.
At this point time, we don’t really see any scenario in which you can buy this pair as the Euro continues to struggle with an ultra-loose European Central Bank, and the general malaise in the European Union as far as economic activity is concerned. On top of that, there is a significant amount of deflationary headwinds in Europe, so it’s a most impossible to imagine that interest rates will rise in the European Union, which of course will continue to work against the value of the Euro. Ultimately, the market should head down to the 1.10 level in our opinion, but we also recognize that it the market needs to take a bit of a breather after the massive selloff. However, the downward pressure remains.