Why EUR/USD Will Fall Down More?

EUR/USD is in a very very strong downtrend that started in June last year. Since then EUR/USD has fallen more than 3000 pips. It’s been a one-way euro trip lower. The common currency has fallen every day this week, and is now near the lowest levels in 12 years.

Now, currency traders are keenly watching American economic data, as better news about the economy could lead the euro drop to intensify.

It all comes down to expectations about the Federal Reserve’s next move. Most market participants believe the Fed will raise short-term rate targets this year. That should help the U.S. dollar and hurt the euro, as it means that holding dollars will produce greater returns than holding euros, increasing demand for the greenback.

EUR/USD Daily Chart

In the above screenshot of EUR/USD daily chart, you can see a strong downtrend. EMA55 is well above EMA 21 for a long time. EUR/USD touched 1.04726 level last month then it shot up more than 800 pips on FOMC Meeting Minutes in which FED made the announcement that it is going to increase the interest rate gradually starting from June. Now it is once again back at 1.05671 level and it looks like the downfall will continue towards 1.04726 which is now a key support level. Two things can happen. If EUR/USD finds support at this level once again it means a double bottom pattern and EUR/USD can go up once again 1000 pips like what it did last month when it shot up more than 800 pips from this level when FOMC Meeting Minutes were released. In this case EMA 55 can act as a strong line of dynamic resistance. When EUR/USD touches EMA55 line it will find strong resistance and the downtrend will continue once again. The other thing that can happen is EUR/USD breaking this support level and going down more. If this happens then expect EUR/USD to go below the parity level of 1.00000.

If you are a EUR/USD trader, you should keep a keen eye on what the FED and the ECB are doing. EUR/USD is a pair that only moves when some big announcement takes place either by the FED or the ECB. In January when ECB had announced the start of the QE program EUR/USD had fallen massively. When FED announced interest rate hike starting from June this year, EUR/USD shot up 800+ pips. So you need to keep an eye on the FED as well as ECB. Right now FED is more important as everyone is expecting an interest rate hike from the FED somewhere in June.