Euro Weakness Dominates the Forex Market & Provides Setups for Next Week

At times the market movement almost entirely revolves around one currency. It is that one particular currency which moves the price the most and is attracting attention of traders. In this week’s trading the Euro weakness probably was the dominating trend of the week.

Today’s post will analyze whether more Euro weakness is to be expected, or will skeptics of this Euro downtrend prove to be correct?

5- 3- 2015 euro power


The Euro fundamentals remain bleak and weak. In an attempt to rekindle economic growth 7 years after the financial crises of ’08, European leaders have (a) lowered interest rates to a near zero level and (b) have introduced Quantitative Easing (QE) for the next 1.5 years.

This is a stark contrast to the US and Great Britain. They are showing more positive economic recoveries and have a decent potential of a rate hike in the next 6-12 months.

5- 3- 2015 eurusd week

Also from a technical point of view, the EURSD has broken below the consolidation bottom at 1.1275 and the bigger bottom at 1.11. The downtrend is back into full force and the bearish momentum keeps pushing with lower lows.

The EURGBP is in fact showing the same story with bearish monthly candles having lots of downside momentum. It has plenty of wide open space as well before it hits support levels at 0.700 (Fib target & round level) and bottoms at 0.65-0.67.

Next week I remain bearish on both the EURUSD and EURGBP and am looking for small retracements to the 38.2% of this week’s weekly candle.

5- 3- 2015 eurgbp


The Euro weakness can also be traded against the commodity dominated currency pairs. However considering the weakness of the CAD against the USD, Forex traders might be better off skipping the EURCAD for the moment.

EURAUD and EURNZD are more feasible choices. Whether shorting the EURUSD, EURGBP, EURAUD, and/or EURNZD is the best pick depends on the price action and movement between the 4 currencies. At the end of this week the weekly candles will provide information on which of the 4 pairs could be the best setup.

When focusing on the EURAUD it becomes evident that price is reaching an interesting bounce or break spot. I am looking for the break of the support trend line (green). In that scenario a lot of bearish space is available between the break and bottom, and then between the bottom and -27.2% Fibonacci target (blue).

5- 3- 2015 euraud weekly


The CHF and JPY are the least interesting currencies when looking at the Forex power indictor (first screenshot). The CHF is the 2nd weakest and the JPY is the 3rd weakest.

Although the Euro is the weakest in comparison with all of the majors, why would a Forex trader not match the weakest with the strongest?

The Euro weakness is best matched with 1 or 2 strong currencies and the best contenders of strength are not CHF or JPY but AUD, NZD, USD or GBP (pending this week’s weekly candle).

Thanks for reading and wish you Happy Hunting!

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