The EUR/USD pair tried to rally during the course of the day on Monday, but as you can see turned back around to form a shooting star. The shooting star suggests that the market is going to fall from here, and as a result we believe that this market will then head to the 1.11 level. Below there, we think that the market should then go to the 1.10 handle, which we believe is the longer-term target. With that, the market is one that we have no interest whatsoever in buying, and as a result we believe that any rally at this point in time is a selling opportunity and the Euro, as it will most certainly continue to be tendered buying the European Union and its potential deflationary problems. On top of that, the European Central Bank should continue a very loose monetary policy, and that of course is bad for the value of a currency as well.
On the other side of the Atlantic, the Federal Reserve has stepped away from quantitative easing. Because of this, the US dollar continues to strengthen overall and with the US Dollar Index breaking above the 95 handle during the session on Monday, the reality is that the US Dollar continues to be one of the strongest currencies available.
Looking at the chart, the 1.15 level above is massively resistive, and even if we got above that level, we believe that this market has massive resistance all the way to the 1.1650 level. That barrier should be massive, and as a result it’s very easy to imagine that even if we rally, the sellers will step back into the marketplace and push this pair lower. If we can get below the 1.10 level, at that point time we believe that the market should continue to go down to the parity level, which is something that we are quite surprised that we are able to say at this point. Ultimately, we don’t even have a scenario in which we are trying to buy this marketplace.