1.20 – Next Stop for Euro

1.20 – Next Stop for Euro

1.20 – Next Stop for Euro

Fundamentals

Before the holidays, we were looking for EUR/USD to hit fresh lows during the last 2 weeks of the year. Now that this goal has been achieved, the next stop for the EUR/USD should be 1.20. The market continues to grow more confident in Fed tightening and more certain that the ECB will announce a broader asset purchase program. The latest political troubles in Greece only highlight the ongoing challenges in the region. Regardless of whether it is a narrow or broad program, QE is coming next year for the Eurozone. The decline in commodity prices is putting significant downward pressure on inflation and if their past views can be a guide, unlike the Fed they will not view this move as temporary. As monetary policy drifts further apart, the pressure on the euro will intensify. From a fundamental and technical basis, we expect the EUR/USD to drop to 1.20 in beginning of the year.

Technicals

1.20 is a very important technical and psychological support level for EUR/USD but today’s move has taken euro below 1.2135, the 50% Fibonacci retracement of the rally that lasted from 2000 to 2008. So far, the currency pair has held this level but the support should be temporary. In the short term resistance is at 1.24 but the main resistance level for EUR/USD is 1.26, the November/December range high.

Chart Of The Day

Leave a Comment

Your email address will not be published. Required fields are marked *