The Euro has gone back and forth during the course of the trading session on Thursday as we continue to dance around the 1.17 level underneath. The 1.17 level underneath of course is the support level that has caused the previous bounce, so the fact that we are hanging around here is not a huge surprise. If we were to break down below the 1.17 level it opens up the possibility of a move towards the 1.16 level underneath, as it is a major support level that extends down to the 1.15 handle.
On the other hand, if we were to break above the top of the candlestick from the trading session on Wednesday, then it is possible that we could go higher, but I think that the 50 day EMA above will continue to offer a bit of a lid on this market, as we had just formed a “death cross”, when the 50 day EMA breaks down below the 200 day EMA. This market will continue to see a lot of selling pressure on multiple fronts, not the least of which of course would be the fact that the interest rates in America continue to spike. If they do rally, that makes the US dollar stronger, especially as the interest rate differential between Germany and the United States continues to widen, and if that is going to be the case then it makes quite a bit of sense that the US dollar has much more strength than the Euro.
We have sold off quite drastically so a little bit of a bounce would make a certain amount of sense. That rally will more than likely be sold into, and that is what I am looking to do, fade rallies that show signs of exhaustion. If we were to simply break down below the candlestick on Wednesday, then I think that opens up the door to much quicker selling. I think at the very least you are going to see is choppy behavior and therefore you need to be cautious with your trading position size unless of course we got some type of clarity that we can really jump on. The massive selloff that we have seen over the last couple of weeks typically does not happen in a vacuum.
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