Good day forex traders and readers.

It is the new year and I hope it will turn out well for everyone. 2014 had been a rough year for me and my family. I lost someone close to me. The world came crashing down and I am still trying to pick up the broken pieces.

In the previous EUR/USD forecast we noted that 1.24 was broken and the currency pair was near the support and bearish target of 1.22. The EUR/USD had recently been to the region before and hence this suggested a strong momentum to achieve this target. We noted a simple technical approach. If 1.22 was breached decisively, the strong support of 1.2 would be the next target.

Technical Analysis

Looking at the EUR/USD weekly chart above we note that the currency pair tested the 1.2 support. I love it when our technical analysis goes according to plan. Congratulations to the readers that took this call.

The technical situation now is very dedicate. We last saw such levels in 2010. While 1.2 is likely to be a strong support, the fundamental situation may be overbearing. We will need to monitor the price action on the lower timeframe. The immediate targets are 1.22 for a bullish correction and 1.18 for a bearish continuation.

Fundamental Analysis

The main reason for the bearish pressure is likely to be the latest comments from the European Central Bank president. He mentioned that technical preparations are underway to react to the deflationary risk if necessary. The market probably see this as an indication that the quantitative easing measures may happen as fast as Q1 of 2015.

I mentioned many times that quantitative easing generally results in excess money supply thus dampening currency demand pressure. The sentiment in anticipation of this is often enough to drive down prices. This is likely to be the euro currency’s situation at the moment.

As the new year picks up, be careful of unexpected movements due to increasing volume. The US Non-Farm Payroll is also due this week.

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EUR/USD Forecast 5 Jan 15

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