We're inching down to what could be a make or break level for EURUSD

For me, there's two key levels for EURUSD right now. The ultimate line is the 2015 low at 1.0458, and the other where we've seen that protected near 1.0500.

EURUSD daily chart

Why those numbers are so important for traders is anyone's guess but they were strong bottoms and the moves following were big. These are levels that can't be ignored but we have to know how to trade them properly.

Looking at the chart above, there's a low risk trade if you want to buy right against those levels with a stop on a break. If we get a break of 1.0450 then again, a pretty tight short could be traded against the same levels.

A clue to why this level has been watched closely can be seen by taking a very wide look at the monthly chart.

EURUSD monthly chart

It's not been exact to a particular number but the 1.03/1.05 area has seen plenty of support and resistance over the years. A break could be the kicker that finally gets all those calling for parity a gold star, long though they have been calling it ;-) Because this is an area of interest, rather than one number, it means we're really need to be looking for 1.03 to break before thinking about seeing 1.00.

But even then, parity watchers might not get their wish as we have another two strong technical levels to watch. On the monthly chart above, that uptrend comes in at 1.0064. At 1.0065 we have the bottom of the 2008 downtrend.

EURUSD weekly chart

Could we really see the fabled 1.000 soon?

It's a possibility but not necessarily a certainty. The two key events that will help it down is the Fed and the ECB, and maybe a sprinkling of the Italian referendum result. Just a 25bp hike from the Fed won't do it (if we're still around the current price now) and it would be a big surprise if the Fed hike in Dec and change their message to turn super hawkish for 2017.

The way some of the ECB members have been talking, they are expecting 2017 to be the year that inflation really starts to gather speed. While they won't take their foot off the pedal, I think they will go for an extension that's longer in date but shorter on purchase amounts, and it's the length of any extension that will kick the euro lower, and even more so if they do keep the purchase level the same.

My overall view is that these two events will just bring short-term moves rather than lasting ones, and wherever that leaves us, I'm going to be looking to buy euros for the long term. If I can get it down near parity and near those tech levels, that'll be an added bonus. I expect to get another hike-n-hold from the Fed and another happy-2-pump but getting better data, from the ECB and that'll mean another top for USD and a bottom for the euro.

Recently, December has had a habit of being a very big month for trading and this one is going to be no different. Just remember when trading, don't listen to the grandstanding number calling of where a price may go, watch and trade where the price does go.

Have a great weekend.