The euro has moved over the historical resistance level of $1.3919 in a matter of days, which pushes it toward the next breakout point and shows the congruence in policy with policy changes being implemented by the Federal Reserve and the European Central Bank. This underscores the strategy of the ECB and Fed that “tighten money”print money” to try to “support” the currency markets.
The euro has moved sharply above the $1.36 support level and the upcoming breakout point for the long term upward trend is clearly the key target for currency trading, which indicates that the euro could continue to rise for the foreseeable future. One important benefit of moving out of the range for this level is that the next support level on the upside is currently $1.37.
On Friday, the Fed announced its first interest rate hike in seven years, signaling that the dollar would face more aggressive strength. For this reason, the Euro is likely to face continued strength in the weeks ahead as investors anticipate that the Fed will begin to add more accommodation. Therefore, the euro is poised to get even stronger at this point in time.
The euro may move above the $1.37 resistance level to the upside because it is being supported by the central banks in Europe and America. Consequently, the price action is likely to continue a trend reversal pattern that is already apparent, which could pave the way for an even stronger upward move.
As a result, the euro is expected to break out of the downward range to the upside at the soonest time, which is early next week. The fact that the euro is overbought with long term sellers due to the central bank’s moves, increases the probability of the breakout. The ECB has already started to increase interest rates and this further enhances the likelihood of the breakout.
Since the next resistance level at $1.38 is oversold, the traders must look for an uptrend to the upside or they will have to exit the euro. Stochastic analysis suggests that the long-term uptrend is likely to reverse at the soonest time.
The dollar weakens and strengthens at regular intervals, which makes it very hard to trade and more so when we trade the US Dollar. We are in the most critical phase of the economic cycle right now, which I mentioned earlier, but we can not let this trend end. We need to be alert and to continue to trade the Dollar because it is the most traded currency in the world.
If the Fed continues to tighten policy, which is planned to be for the next few months, then the dollar weakens, which is a long term bullish signal, because dollar weakness in general means economic strength, which makes the economy grow faster. Furthermore, we know that economic cycles are never the same, which is why the uptrend is robust.
Since the economic cycle will not be the same as all the others, the euro should continue to move higher, which will also boost the USD. Since the EUR/USD and the USD/EURO pairs are strong, the EUR/GBP pair is also likely to strengthen and the USD/EUR pair could be profitable.
To be successful in the long term uptrend, one needs to know that it is not easy to find a profitable entry or exit. One should continue to trade the USD and the EUR and also the GBP because we are in a critical phase of the economic cycle right now and therefore, we need to trade the right currency pair at the right time.
In addition, if you only trade one currency, then you may lose money if you only trade a long term up trend and then exit the currency. It is important to remember that the market always has to run and one needs to be flexible in their approach.
If the dollar weakens and continues to move down, the EUR and the USD should continue to strengthen, but only if it is weak that there is the possibility that it will reverse sharply. this is because, no other currency is stronger and will be higher than the USD.