EUR/USD Forecast January 3, 2014, Technical Analysis

The EUR/USD pair fell during the session on Thursday, slamming into the 1.3650 handle. At that area, we have seen support recently, as well as resistance back in November. Because of this, it’s not a huge surprised to see this market show that buyers stepped back into it at that general region. Ultimately, this is probably more a function of an illiquid market than anything else, although Credit Suisse made headlines during the session by becoming bearish on the Euro. However, don’t let headlines for you, that is and what moves the marketplace.

Ultimately, we believe that the Euro will fall, but a little bit of bullishness between now and then is to be expected. A lot of this will be predicated upon the jobs situation in the United States still, keep in mind that the Federal Reserve could continue to taper off of quantitative easing if the employment market looks healthy. On the other side of the Atlantic, you have the European Union which is concerned about deflation. That would usher in a new era of monetary policy that would be very loose in the EU, which of course is negative for the value of the Euro in general.

That being the case, we feel that this market will probably continue to be very choppy overall, but we still think that this general vicinity will more than likely offer support to the Euro. After all, a lot of the so-called “big money” is an even in the marketplace right now, so these moves are probably being made in a relatively thin marketplaces. Until the nonfarm payroll number comes out next week, one would have to assume that the currency markets will be relatively thin, and as a result any move will more than likely be exaggerated. It is because of that that we are not overly bearish of this market at the moment, and recognize that the 1.36 level should be an area of intense buying pressure. In fact, we did see a significant bounce late in the day, so it is possible that we will simply grind sideways for the time being, setting up a lot of short-term scalps.