EUR/USD forecast for the week of October 13, 2014, Technical Analysis

The EUR/USD pair initially rallied during the course of the week, but found enough resistance of the 1.28 level to turn things back around. This level was previously determined to be the 61.8% Fibonacci retracement of the longer term up move, which of course means that the area was supportive in the past, and could very well be resistive now. It does appear that is the case, and as a result we are starting to gain bearish momentum in our opinion.

The resulting candle is a shooting star of sorts, signifying that perhaps the downtrend will accelerate, and we do believe that the 1.25 level below could ultimately be the “trapdoor” for lower prices. We look at the longer-term charts, a complete “round-trip” from the move that initially started the uptrend would be a move all the way back down to the 1.20 handle.

Because of this, that is our longer-term target. After all, you have to keep in mind that the Federal Reserve is most certainly the strongest central bank out there right now, and although the last meeting’s minutes suggested that perhaps the Federal Reserve was a little bit leery about tightening, the truth of the matter is that they are nowhere near loosening. With that, you have to compare the two central banks, with the European Central Bank looking very likely to add liquidity to the marketplace, the US dollar should continue to strengthen.

On top of that, although there are a bit of head wins when it comes to the US economy, most of the concerns, in the form of other economies putting a drag on global demand. Most specifically, the European Union. With that, it is obvious that the markets will favor the US dollar over the longer term, and as a result it’s very difficult to imagine that this pair will go higher. We also see a significant amount of resistance just above the 1928 level, extending all the way to the 1.30 level. With that, is much easier to sell this market than buy it.