EUR/USD falls to support during the week

The EUR/USD pair broke down during the week, reaching towards the 1.21 handle, and even broke down below there during the Friday session, only to find buyers again. The question is now whether we can retake 1.21 again? If we do, I think the market will go back towards the 1.2350 level, then the 1.25 handle. When I look at this chart, it’s easy to see a bullish flag that had been broken to the upside previously, and that flag measures to the 1.32 level. Although this has been a very negative week, it looks as if the market is still intact for that move. If we were to break down below the psychologically important 1.20 level, then I would say all bets are off.

Be slow to build your position higher, but I think that by the end of the year, we could be looking at 1.32 handle. However, it has been suggested by Mario Draghi that interest rates in the EU may stay at these low levels for an extended amount of time, which has been part of the reason we have seen the selloff. With the treasury yielding 3% in the 10-year version, it has put bearish pressure on this pair as people flocked to the US dollar. However, without that upward pressure in yields, I think this market were turned right back around and we would continue to see the market try to build up momentum. If we break down below the 1.20 level, then I anticipate a move to the 1.18 level.