The EURUSD pair initially fell during the course of the day on Monday, but as you can see bounced enough to break back above the 1.24 handle.

However, this is a market that is most certainly in a negative downtrend, showing that the market will more than likely continue to meander around in this area, continuing the sideways consolidation that we’ve seen for some time. That being the case, the market should continue to stay below the 1.26 level in the foreseeable future.

Ultimately, we believe that this market goes much lower, probably down to the 1.2050 level, but this week could be a little bit quiet because the Americans of course have Thanksgiving. That makes the week short, and once we get the Thursday, the Americans won’t even be involved. On top of that, we are getting close to the overall holiday season so the markets could calm down a little bit. However, sooner or later there will be a lack of liquidity and that will cause a couple of erratic days as we see every year.

Ultimately, we are looking for selling opportunities closer to the 1.25 level, or possibly even the 1.26 area. Resistant candle in that area for us is a selling opportunity as it represents “value” in the US dollar. The downtrend is very strong and quite frankly should be based upon the way that the two central banks are behaving.

The Federal Reserve of course has left the quantitative easing game, while the European Central Bank of course is more than likely going to have to loosen its monetary policy which of course will bring down the value of the Euro over the longer term based upon what would be going on in the bond markets. On top of that, there is the likelihood that the European economy is still struggling, so there is a good chance of course of the value the euro will continue to deflate.

Ultimately, we sell rallies in breakdowns as this market continues to go much lower given enough time. It is not until we break above the 1.30 level that we would seriously consider buying.

Editor’s Note: Equity investors/traders can use the Currency Shares Euro Trust (FXE, quote) ETF to take positions in the euro without a FOREX account.  The ETF looks to track the price of the euro (EURUSD), minus ETF fee. The fund seeks to reflect the price of the euro with the shares representing a cost-effective investment relative to investing in the FOREX market.

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