EUR/USD Forecast – Euro Drops to Test 200 Day EMA

Euro vs US Dollar Technical Analysis

You can see that we dropped down to the 200-day EMA rather quickly during the trading session on Wednesday. However, as New York is starting to come online, it does look like we’re going to at least try to defend this important marker. I’d also point out that the 1.08 level is an area where we’ve seen pretty significant resistance previously, so a certain amount of market memory probably comes into picture here anyways. When I zoom down to the one hour chart it is obvious that we are in a very choppy market. I just don’t see how things change anytime soon especially considering you have to keep in mind both central banks are likely to cut this year.

The Federal Reserve is projected to cut at least three times and the ECB is a little bit more of a question at this point but with Germany heading into a recession, the question isn’t so much whether or not they’ll cut, it’s more like when and by how much. As long as that’s going to be the case, you should have a fairly range-bound euro most of this year. 1.10 above is my ceiling, and 1.07 underneath is my floor.

However, if we were to break down through the 1.07 level, it could open up to the 1.05 level, in essentially, what could look like a repeat of 2023. This is a pair that does tend to be very choppy over the longer term anyway, so it shouldn’t be a huge surprise. With that being said, you will have to pay attention to interest rate differentials, so pay attention to the German bond market and the US bond market to see what the interest rates are doing. The further they diverge, the more the market will move in favor of one of those currencies.

One other thing to keep in mind is that the US dollar is considered to be a bit of a safety currency, so if geopolitics starts to get out of control, that probably helps the greenback anyway. Let’s be honest here, there’s a lot out there that could have the markets running toward safety.

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