13:13, 12 April

Projected Euro Weakness

The last year of EURUSD price action has been mostly a one-way street, with one notable acceptation during the summer of 2018, with Euro weakness and USD strength.

From a technical standpoint the charts tell the story and the pair has been back below the 100 and 200 day moving averages for a couple of weeks now.  The range between 1.12 and 1.13 was a happy home for EURUSD during much of 2015 and 2016 but we saw lows in the 1.04-1.05 during those same years.  Highs above 1.25 occurred briefly during February of 2018 and we are back in the 1.13 area now.

Many fundamental analysts are predicting Euro weakness, and a break below 1.120 could see some major moves to the downside.  We have been in a clear bearish channel since the beginning of this year and we will wait to see if price rebounds to hit the upper trend line which might intersect at around 1.1360.  If the “trend is our friend” then there are many waiting for the short opportunity so the small bull run of the last few days may be short lived.

This week, Mario Draghi warned of downside risks and has kept interest rates at an all-time low while trying to keep inflation under control.  There are no expected rises in the ECB interest rates so this will not help the value of the Euro.  In fact, there are mutterings of further reductions but nothing has been confirmed.  To add insult to injury, on the other side of the pair, the US may be planning additional tariffs on EU goods.

Just yesterday, the US Federal Reserve told us that the “US economy is in a good place” so, with this EURUSD set of scales in “imbalance mode”, we can see where price action might take us.