EURUSD Is Heading Towards 1.00000 Price Level

EURUSD has been trending down for many months now. The downtrend started in May when EURUSD found heavy resistance at the level of 1.38824. Since then EUR/USD has fallen more than 2200 pips to 1.17500 level. Take a look at the following EURUSD weekly chart that is showing a very strong downtrend.

EURUSD

As you can see the downtrend is pretty strong. The most important question is at which level EURUSD will find support. Market analysts are now predicting EURUSD going below 1.00000 level. Hard to believe even a few weeks ago, but now pros are talking about how the weakening euro could fall so low it could trade at parity with the dollar-or even lower.

If you just look at the above weekly chart, you can see EURUSD making strong bearish white weekly candles for the last 4 weeks which is a strong indication that the downward pressure on EURUSD is getting pretty strong.

After watching the 19-nation currency slide as low as $1.1754 today from last year’s high of $1.3993 in May, ING sees it continuing to weaken all the way to $1, a level last seen in 2002. The median estimate of more than 30 forecasters in a Bloomberg survey is $1.15 by the end of 2016.

ING expects measures by the European Central Bank to boost the euro zone’s flagging economy and avoid deflation will have direr consequences for the currency than most other firms. Few investors will want the euro as policy makers expand the money supply, especially as the Federal Reserve makes dollar assets more attractive by raising interest rates.

EURUSD is the most heavily traded currency pair. We love to trade EURUSD. It is a very stable pair. It provides low risk trades and trends well. As a EURUSD trader you should master its fundamental analysis. Read this good Investopedia article that gives a good walk through for this pair. Below is an excerpt from this article!

“…The primary issue that influences the direction of the euro/U.S. dollar pair is the relative strength of the two economies. Holding all else equal, a faster-growing U.S. economy strengthens the dollar against the euro, and a faster-growing European Union economy strengthens the euro against the dollar. As previously discussed, one key sign of the relative strength of the two economies is the level of interest rates. When U.S.interest rates are higher than those of key European economies, the dollar generally strengthens. When Eurozone interest rates are higher, the dollar usually weakens. However, as we’ve already learned, interest rates alone can not predict movements in currencies.

Another major factor that has a strong influence on the euro/U.S. dollar relationship is any political instability among the members of the European Union. The euro, introduced in 1999, is also relatively new compared to the world’s other major currencies. Many economists view the Eurozone as a test subject in economic and monetary policy. As the countries within the Eurozone learn to work with one another, differences sometimes arise. If these differences appear serious or potentially threatening to the future stability of the Eurozone, the dollar will almost certainly strengthen against the euro….”

Now this article was written a few years back but it correctly identifies the fundamentals that affect EURUSD. Political instability in Eurozone makes EURUSD wobbly. Greece is once again making Eurozone wobbly. Many analysts are predicting that Greece is about to leave the Eurozone. Remember a few year back there were many analysts who were predicting the demise of EURO as a currency when the sovereign debt issue plagued the Eurozone. Then Ireland, Spain and Greece were in the forefront. Once again Greece is in the forefront. Many analyst think that it was a hasty decision to include Greece in the Eurozone. Now the time has come to pay the price.

While a Greek departure alone may not end the euro, the risk would be of contagion through the bloc’s financial markets that forced others out. If it had to return to the deutsche mark, German exporters, which account for about half of gross domestic product, would become much less competitive and Merkel’s prized current-account surplus would shrink. Inflation would weaken further.

0 Comments