Next Stop EUR/USD: 1.4000 or 1.3500? By S. Wade Hansen (16 July 2007), uploaded: 17 July 2007.
It's a good question. Is the EUR going to continue its ascension against the USD, or is it going to have to endure a small pullback on its way to the moon?
I say 1.4000, and I have three reasons why.
1. The U.S. economy has not yet felt the full impact of a slowing housing sector and a sub-prime let down. As food and energy prices continue to climb, more and more families are going to face foreclosure---and that's no good for anybody.
2. The European economy appears to be doing quite well. With the actual health of the U.S. economy still in question, investors are going to continue to reposition their assets in a more secure environment.
3. Finally, psychologically, global investors want to see the EUR/USD hit 1.4000, and the U.S. is not going to step in to stop the rally. For the time being, it is in the best interest of the U.S. government to have a weaker USD. Politicians can score big points if they can say they "had some part in" reducing the U.S. trade deficit.
One caveat, the EUR/USD may drop to support at 1.3600 before continuing on up to 1.4000, but it won't hit 1.3500 again any time soon.
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Analysis by Profiting With Forex (PFX)
