Any rally between here and there is going to be thought of as a potential shorting opportunity in order to pick up “cheap US dollars.”
- The EUR/USD currency pair fell hard Wednesday to break down below the 1.02 level.
- The 1.02 level is an area that has a certain metapsychology attached to it, so it is worth paying close attention to.
- If we were to break down below that level significantly, then it’s likely that we go looking to the parity level next, which is my longer-term target to begin with.
- This is a market that I think will continue to draw from here, as the market continues the overall downtrend.
The US dollar will continue to strengthen against the Euro due to the fact that the Federal Reserve is tightening monetary policy, and the economy in the United States continues to outperform the European Union. Ultimately, this is a market that I think will find plenty of selling opportunities above, especially near the 1.04 level if we get some type of relief rally. However, the last couple of candlesticks have shown us just how negative the market is, so you should pay close attention to it. I have no interest whatsoever in trying to buy the euro right now, as they are worried about energy in the EU, not necessarily something that bodes well for the outlook of the economy.
The Parity Level
At this point in time, I think parity is going to be hit sooner rather than later, so you should pay close attention to the overall attitude of the market. As long as we have more of a “risk-off” type of situation out there, parity is the most likely outcome. In fact, if we look at longer-term charts, you can make an argument for the market blowing through parity and going all the way down to the 0.85 level. I don’t know if that happens, but it’s a theoretical possibility.
As far as buying is concerned, the market would have to break above the 1.06 level to even begin to show signs of strength that you could pay attention to. Any rally between here and there is going to be thought of as a potential shorting opportunity in order to pick up “cheap US dollars.” In that scenario, you simply will fade rallies at the first signs of exhaustion and profit time and time again. The trend is ensconced and getting stronger.