In the past week EUR/USD consolidated in a range slightly over 100 pips. It is now starting to signal continuation of the prevailing downtrend. Let’s assess the current price action as well as where the downside risk has EUR/USD going to.
After consolidating, EUR/USD found resistance at 1.1870, a previous support, and fell back to the 1.1754 low this week. After a failure to return above 1.18, price is now breaking lower. This break followed a court ruling that the ECB is not breaking any rules with its OMT program. It is now poised to implement QE in this month of the next. Price has more downside as the market continues to price in QE. The next support in the short-term is 1.1640, the 2005-low. Below that, the 1.12-1.1210 involves the 61.8% retracement of the 2000-2008 rally.
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