The EUR/USD pair initially rallied during the session on Wednesday, but as you can see turned things back around and formed a relatively negative candle. This is not a huge surprise though, simply because we have the FOMC Meeting Minutes coming out, and that almost always leads to volatility in the US dollar, and most major currencies trading against it. With this, there was a flood of money into the US dollar, as it appears that the market thinks it is possible that we get a rate hike sooner than originally thought, and that of course has more money flooding into the Dollar.
On the other hand, the European Central Bank continues to keep a very loose monetary policy in effect, and that means that the Euro should continue to suffer in general. With this, it’s very likely that the Euro will continue to fall given enough time. There is very little out there that makes us believe that Québec this pair is going to rally anytime soon, and quite frankly we look at rallies as potential selling opportunities as they represent value in the US dollar.
On the other hand, if we can simply break down below the 1.0750 level, we feel that the market will continue down to the 1.05 handle given enough time. That more than likely will be a support level, but at the end of the day it’s very likely that we even break down below there and start heading to the next major psychological level, which would of course be the parity level. We believe that’s eventually where we are going to happen, but it’s probably going to take a significant amount of time to get there. After all, the Euro has lost an extraordinarily large amount of the previous value, so most of the easy money has already been made, and as a result this market should continue to sell off but probably at a much slower rate than previously seen over the last several months. Regardless, we have no interest in buying the Euro at the moment.