Where Next for the Euro?

07/21/2014 9:00 am EST

Focus: CURRENCIES

Last week, despite the bad headlines out of Europe, the massive selling of the euro did stop, however, Adam Button of ForexLive.com still likes the downside and lays out what might be in store for the currency this week.

What do you make of the euro EUR/USD break of 1.3500 and the reversal?

It was below 1.3500 for less than two hours on Friday but the barriers were still busted. However, longs were barely squeezed and now the euro is fractionally higher at 1.3527.

The double doji that’s shaping up on the daily chart points to a big move in the days ahead. On the one hand, there’s been virtually no bounce from the beating at the start of last week. On the other, the selling stopped despite some poor headlines in Europe on Friday.

chart
EURUSD daily

Click to Enlarge

But there’s no fence-sitting here. I still like the downside and I think there was some short covering late last week at work.

This week is not a big one in Europe. This week, the highlights are the German/French PMIs along with the IFO survey—the numbers have been disappointing lately so that could help.

The better bet might be on the other side of the trade where the US dollar could benefit from CPI or durable goods orders. Signs from the Philly Fed and elsewhere point to a pickup in orders and confirmation would get the dollar bulls excited about Fed hikes again.

By Adam Button, Editor, ForexLive.com

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