The Euro Bounces From Parity

It’s likely that we see more downward pressure.

The Euro fell a bit to the parity level during the trading session on Tuesday but bounced rather quickly to show a bit of hesitation to break down through there. I do think that eventually we do break below parity and make a beeline to much lower levels. However, we have fallen so fast that I do think a bounce is a bit overdue.

We do bounce from here, the 1.02 level could be a target, as it is an area where we should see a significant amount of short-term resistance. Even if we break above there, then the market is likely to go reaching towards the 1.04 level. The 1.04 level is an area that has previously been supported, and therefore it does make quite a bit of sense that we could see a bit of “market memory” in that area.

The market has been overdone for some time as people are starting to run from the Euro due to the fact that the market is looking at the economy in the European Union as one that is in quite a bit of trouble due to the fact that we are worried about the amount of energy that is available. Furthermore, there are a lot of concerns about growth, to begin with, so it does not exactly have people looking to get away from the US dollar as safety will be paramount. The Euro is the “anti-dollar”, so therefore it will take the most punches to the face in this attitude.

Looking for signs of exhaustion will be the way going forward so that you can pick up “cheap US dollars.” Because of this, I think it is only a matter of time before we go lower. Once we do break down below the parity level, we could go down to the 0.98 level. The market could then very well go looking to the 0.95 level, but that does not necessarily mean that it is going to be quick. I think it’s going to be more of a process of dismantling the Euro going forward.

If we were to turn around and take out the 1.06 level, you would have to reassess the entire train, but right now there’s nothing fundamentally likely to happen that we should see the Euro reverse its fortune. With this being the case, it’s likely that we see more downward pressure.

EUR/USD chart

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