EUR/USD Forecast – Euro Continues to Break Down

Euro vs US Dollar Technical Analysis

The euro broke below the 1.07 level to show signs of extreme weakness during the trading session on Friday. That being said, a lot of this comes down to interest rate differential and perhaps the realization that the Federal Reserve will not be cutting rates nearly as quickly as one spot.

In fact, some people are starting to price in the idea that the Federal Reserve won’t be cutting it all this year. Inflation numbers in America have been decidedly sticky, and that, of course, has had a major influence on what has been happening in the US dollar against pretty much everything. So, with that being said, we have taken on a decidedly negative tone when it comes to risk appetite.

It’s probably also worth noting that European economic numbers are still a little on the soft side. But really, at this point in time, I think this is more or less going to be about the interest rate situation in America. So, with that being said, I’m watching the 1.07 level for signs of potential resistance on the way back up.

If we pull back and then fall again, it’s a short signal down to the 1.05 level. If we were to reenter this consolidation area up here, I still would probably favor the downside. Given enough time, it would just show that we don’t have enough momentum. Ultimately, this was a market that was testing significant support. It has now broken through quite a bit of it. This is a major signal perhaps, but at this point in time it still has a lot of external pressure on it, as the market continues to pay close attention to the interest rate markets.

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