EUR/USD Forecast: May 2022

I do not think that the Euro is going to reverse the trend anytime soon, so I certainly have a downward bias when it comes to this market.

The Euro has had a very rough month of April, and the way we are closing out the month suggests that we may have further negativity ahead. It is worth noting that we have tested the 1.05 level, an area that is a large, round, psychologically significant figure. This area could offer a little bit of profit-taking and a short-term bounce. However, that bounce should end up being a nice selling opportunity and I think that will be the theme of the month of May for the Euro.

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The 1.08 level is an area that has been important on the way down as well as previous resistance. All things being equal, the market continues to see a lot of negativity out there, as the interest rate differential between the European Union and the United States has caused a lot of downward pressure. The US dollar is also a place that people run to when they are looking to find a bit of safety. As long as that is going to be the case, and it certainly looks as if there are plenty of reasons for that to be, I do believe that this pair will continue to find plenty of sellers.

However, this does not necessarily mean that we fall straight down to the bottom. Short-term rallies will occur, perhaps lasting a couple of days. At the first signs of exhaustion, I am more than willing to start shorting this market, because quite frankly the trend is so strong, and it is also worth noting that Europe has a major issue in the form of a lack of energy. They are stuck in a situation where they will have to do something about Russian natural gas, and a lack of natural gas is disastrous for the outlook of the European economy.

The 1.08 level above is significant resistance. If we were to overtake that area to the upside, then we might have the opportunity to go to the 1.10 level. However, I do not necessarily think that is as likely as giving up gains much sooner than that, and I will be shorting at the first signs of exhaustion on every rally. I do not think that the Euro is going to reverse the trend anytime soon, so I certainly have a downward bias when it comes to this market.