EUR/USD Forecast – Euro Rallies Into the Weekend but Shows Signs of Weakness

EUR/USD Forecast Video for 02.10.23

Euro vs US Dollar Technical Analysis

The euro rallied a bit during the trading session on Friday, showing signs of life again and an attempt to recover. However, it’s also worth noting that the market is starting to show signs of hesitation, so it’ll be interesting to see whether or not we can continue to recover. The recent “death cross” that formed recently suggests that we are in the longer term downtrend, but it is worth noting that we bounced from the 1.05 level, as it is a large, round, psychologically significant figure. If we were to break down below the 1.05 level, then it’s possible a drop down to the 1.0250 level, and then eventually parity. This would not surprise me at all.

That being said, markets don’t go in one direction forever so therefore you have to accept the fact that these bounces will come from time to time. However, the overall trajectory of this market is most certainly to the downside, and of course there are plenty of fundamental reasons to believe it will continue. Not the least of which of course is going to be the fact that the European Union is heading into a nasty recession, and also the fact that the Federal Reserve is going to keep the interest rate situation very tight going forward. As long as that’s the case, it’s very likely that every rally will eventually be sold into, although there will eventually be some type of big move that goes against the overall fundamental picture as typically happens in these major selloffs.

As far as buying the euro is concerned, I don’t really have a scenario in which I’m willing to do it currently, but I’d have to rethink some things if we can break above the 1.07 handle, but it would need to be accompanied by some type of fundamental reason to think that the market should shift its overall trajectory. That would mean that rates in the United States suddenly start falling, or perhaps the Federal Reserve sounds like it’s ready to change its tune. It’s nowhere near doing that currently, so right now it’s just simply a matter of fading rallies.

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