The EUR/USD pair initially tried to rally during the session on Tuesday, but as you can see we found trouble just above the 1.32 handle, which of course was where the market gapped from at the open on Monday. With that, it makes sense that we would turn around and continue to fall, and more importantly form a shooting star. This is a market that simply cannot get out of its own way, and as a result I believe that this market goes down to the 1.30 level in the short-term.
Ultimately, I actually believe that the EUR/USD pair will go down to the 1.28 level, but that’s a little bit more of a longer-term call. I would fully expect to see a bit of a bounce from the 1.30 level in the short-term, and I would be looking to sell that bounce as we show signs of resistance. I am already shorting this market, and as a result have no interest in reversing my position due to the fact that we gapped lower at the open on Monday.
European Central Bank
The European Central Bank looks set to loosen its monetary policy, and as a result I find that this market cannot be bought. After all, the Federal Reserve looks like it’s ready to continue tightening its monetary policy, so this makes a bit of a “perfect storm” in this market as the two central banks or so diametrically opposed to each other. This should continue to weaken the value of the Euro, and strengthen the value of the US dollar.
I believe that the Euro will continue to lose value against most currencies, just as the US dollar will continue to strengthen. Ultimately, anytime this market slows down, I will be looking to trade those currencies against other currencies as I see numerous opportunities in other pairs to buy the US dollar, and sell the Euro. Remember, even if you aren’t trading this market, you simply must look at this for relative strength in the Euro in order to understand what happens in other pairs involving that particular currency, as well as the US dollar.