The Euro has gone back and forth during the course of the trading session on Monday to show signs of hesitation yet again. It initially tried to rally, but then gave back those gains to slam into the 1.16 level. We have since bounced from there, and it certainly looks as if the 1.16 level will continue to cause a certain amount of support. What I find most interesting is that the 1.16 level is the top of the range for the trading session on October 13, which is where we started to rally from.
Breaking down below the bottom of the candlestick for the trading session on Monday could open up further selling, perhaps down to the 1.1525 region. Breaking down below the 1.15 level could open up a bit of a bigger move to the downside, but at this point in time it does not look to be as likely as once thought. On the other hand, if we were to turn around and break above the highs of the trading session on Monday, then it would break above the highs of the last week or so, suggesting that perhaps we could go further. At that point, I would anticipate that the 1.1750 level will be the next target.
Looking at this chart, I think that the most likely outcome would be choppy behavior, and therefore you need to continue to pay close attention to this overall range. The Euro of course is a very choppy currency regardless, so I think at this point in time it more or less serves as a proxy for the US Dollar Index more than anything else. The pair is difficult to trade for a bigger move, so a lot of times I will simply look at it as a proxy for what to do with the US dollar. The pair falling shows US dollar strength, and therefore it is likely that the US dollar will rally against other currencies as well. On the other hand, if the Euro were to take off to the upside, it would show just how weak the US dollar is, and I would anticipate that some currencies out there would really start to take off as they are not held down by the ugliness when it comes to the European economy. I still believe this is more or less going to be an indicator.
