Euro Continues Its Downtrend

Alan Penny

31 October 2019

3 min read

EUR/USD forex trading

  • Euro continues to find distance at 200-day EMA
  • Failure at same level again
  • Longer-term three-year downturn

The euro initially tried to rally during the trading session on Thursday, but it has given back some of the gains in a continuation of the cycle that we have seen for so long. The market has had quite a bit of buying pressure suddenly, and then we see it start to drop off again.

Every time the market gets close to the 200-day EMA, people start to sell the euro again. The recent surge higher is starting to see more of the same, and therefore it looks likely that this, all things being equal, will be yet another rollover.

It looks as if the 200-day EMA just above current pricing is being paid close attention to, as the euro has pulled back from the 1.1185 region with the specter of the 1.12 level above looming large. On the other hand, there is significant support underneath the 1.1075 level, an area that has seen several days find buyers jumping in at it.

Technical analysis

EUR/USD yearly chart

The technical analysis for the pair is still negative, as the 200-day EMA is a larger time frame trend-following mechanism. In general, you should see sellers jump in every time the market reaches towards that area.

It is because of this that if the market were to break above its weekly time frame, then it could signal a massive trend change. However, we have seen this market test the 200-day EMA and even break above it slightly before pulling back again.

The 50-day EMA is well below current trading, so that could be a potential target. In general, it will be something different if we do break down below there, because it will be an acceleration of the downtrend yet again.

The 50-day EMA is well below current trading, so that could be a potential target

All things being equal, the market should be more of a grind lower because this pair does tend to be very choppy, to say the least. As we are between the 200-day EMA and the 50-day EMA, it has a bit of a “push and pull” type of attitude to it, with the short-term and longer-term moving averages attracting different types of traders.

This is a market that should continue to find plenty of choppiness as this is its usual nature. So, if you look at the chart from a longer-term perspective, you will understand that selling and simply hanging on to that position has been the way to trade this market for at least three years.

With that in mind, you should understand that the euro is still very much in a downtrend, even though the market has rallied significantly over the last couple of weeks. All things being equal, this is a market that should continue to find plenty of reasons to go lower.

That’s due to the fact that the European Union is so economically weak. And although the United States has slowed down a bit, it is still head and shoulders above the European Union right now.

Written By
Alan Penny

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