The EUR/USD pair has been fairly quiet towards the end of the year, as we continue to hover above the 1.05 level. The market looks as if it wants to break down, and I believe it will eventually. A break below the 1.05 level should send this market to the parity level, and I think that’s where we will end up sometime early in 2017. In the meantime, we can probably expect a balance or two here and there, trying to build up momentum to the downside as the US dollar will clearly be the favored currency worldwide. After all, the Federal Reserve is likely to raise interest rates at least once, if not more times. On the other hand, the European Central Bank has recently extended quantitative easing to the end of the year, so I think that the Euro will be on the back foot for this quarter if not the entire year.
Taking advantage of value
Every time this market rallies, you have to think about value in the US dollar. Exhaustive candles above will be a nice selling opportunity as we try to build up the momentum to break down. I actually believe that we will go below parity, but you have to believe that the parity level will offer quite a bit of noise and potential support as it is such a large, round, psychologically important number. With this, I think that you will have several different “waves” of bearish pressure going forward.
Ultimately, I don’t have any interest in buying the Euro, at least not until the ECB changes it stands, or if the Federal Reserve fails to raise interest rates, something that I don’t think politically can happen anytime soon with the election of Donald Trump. With that being the case, I believe that the “ceiling” in this quarter will probably be the 1.10 level above.
