The EUR/USD pair went back and forth during the session on Friday, struggling to find any type of clarity at all. It looks as if the 1.09 level is going to be a bit of a magnet for price going forward, so if we can break below the bottom of this range, at that point time I feel that the market will have finally broken down a bit. Once we get that, I think it’s only a matter of time for we had to the 1.05 level again, which of course was the area that we bounced from significantly a couple of weeks ago. I think that the downtrend is far from over, and you can see that I have a yellow rectangle drawn on the chart to signify where I think all of selling pressure seems to be at the moment.

The European Central Bank

Remember, the ECB will have to keep a fairly loose monetary policy going forward, it’s probably only a matter of time before those liquidity measures push the value of the Euro down even farther. On the other side of the Atlantic, you have the Federal Reserve which is completely left quantitative easing game. While there are some signs of an improving European economy, quite frankly it’s a bit early to get excited about owning the Euro right now. Don’t get me wrong, I think that this trend will certainly change going forward, but I think we need to test the parity level.

The real barrier to get parity right now as the 1.05 level, so it’s not until we break below there on a daily close that I think we will attempt that move. In the meantime though, I think getting back down to that area is very realistic. I think that it is going to be choppy and volatile going forward, but at this point time you can only favor the downside as the latest rally, although impressive, is but a blip on the radar when it comes to the overall trend.

Click on picture to enlarge