EUR/USD Forecast – Euro Gives Up Early Attempt at a Rally

EUR/USD Forecast Video for 16.10.23

Euro vs US Dollar Technical Analysis

The euro has initially tried to rally during the trading session on Friday, as the market tries to recover some of the massive losses from the Thursday session. That being said, the market looked as it was getting ready to break down the potential bearish flag. The 1.05 level underneath it does offer a psychologically important level, but if we were to break down below there, then it’s likely that we will test the recent swing low. I also believe that could kick off further selling, perhaps sending the Euro down to the 1.0250 level, and then maybe even as low as parity.

Any short-term rally will be looked at with suspicion, as interest rates in the United States are much harder to break down than people were hoping, and of course recent inflation numbers in the United States add more credence to a strong dollar, so it all ties together for a potential bigger move.

If we were to rally from here, the 1.0650 level offers a significant short-term ceiling, and breaking above there then brings into light the 50-Day EMA which of course is also important as well. This is a market that continues to see a lot of negativity, and even though we had a nice grinding rally earlier in the week, it looks like all of that positivity has just about left the market now.

Keep in mind that Europe is getting ready to head into a fairly significant recession, so that’s something to be cognizant of as well. Although the market is likely to continue seeing a lot of different narratives throwing things around, the reality is that the geopolitical situation also favors the US dollar, as it is used as a safety asset. Ultimately, the downward pressure should win the day, and we should go much lower over the longer term. I look at any rally as an opportunity to start buying “cheap US dollars” along the way. With this, a little bit of patience probably goes a long way as well, as it looks like we continue to see yields in America outperform Germany and the rest of the European Union, and of course fears continue to be stoked around the world as well.

For a look at all of today’s economic events, check out our economic calendar.