EUR/USD Forecast: Euro Breaks Through Minor Support

The euro fell again on Tuesday as we have broken through the 1.0950 level. This is an area that has been minor support previously, so it is not a huge surprise at all to see that there was a bit of follow-through once we did break through it. By doing so, the market looks as if it is ready to challenge the 1.09 level, and then the 1.0850 level given enough time.

Keep in mind that the 1.0850 level has been supported in the past, which we bounced from rather rapidly. That does not necessarily mean that it will hold like a brick wall, just that the market obviously has a lot to contend with in that general vicinity. Overall, this is a market that will continue to be very noisy, but it certainly has a lot of negativity attached to it as the Federal Reserve continues to look ready to threaten with higher interest rates, and of course, the bond market has already beat the Federal Reserve to that punch. Interest rates in America continue to rise rapidly, and that continues to make owning US dollar-denominated debt much more interesting than it is euro-denominated.

We are closing towards the bottom of the candlestick, which typically means there is going to be some follow-through. I get this even more credence due to the fact that we are in a downtrend and have been for quite some time. The fact that we pulled back to the 50 Day EMA and then broke down is also something that I would pay attention to, especially as the area between the 1.11 and the 1.12 levels above has been so difficult as far as resistance is concerned more than once.

This is a market that I think is going to test the lows, and if we can break down below that area, we may even go as low as 1.07 over the next several weeks. There are a lot of concerns out there when it comes to the European Union as far as inflation and a lack of growth are concerned, especially as energy is simply a major issue. If there is a lack of energy, it all but guarantees that we are going to have a recession in that part of the world.