The euro initially tried to rally on Friday to break above the crucial 1.11 level. However, we have turned right back around to show signs of hesitation. By doing so, the market looks as if it is still struggling to bit, but the 1.10 level has offered a bit of support. In other words, the market is banging around quite noisily. I think at this point in time, is very likely that we will still see quite a bit of resistance above that extends to the 1.12 handle.
If we were to break down below the bottom of the candlestick for the trading session on Friday, that would open up a move below the 1.10 level and perhaps allow the euro to break down towards the 1.08 level underneath. This is an area that has been rather important previously, so it would not be surprising at all to see a bounce from there again. However, if we were to break down below that level, then it is likely that the market could go looking towards the 1.05 level over the longer term.
The Federal Reserve is looking to hike interest rates and that should continue to be a major influence on the US dollar. Ultimately, the market looks as if it is trying to repudiate that though, and perhaps suggests that traders do not believe that the Federal Reserve will tighten the way they say they are planning on doing so. However, I would not be a buyer of the euro until we break above the 1.12 level, because at that point it would be a significant breach of major resistance.
Because of this, the market more likely than not should give us an exhaustive candlestick, but it must be stated that the Friday candlestick does fly in the face of that. I think the next couple of days will be very noisy, but if we break above the 1.12 level on a daily close, then I would have to go ahead and hold my nose to get long. On the other hand, if we break down below the 1.10 level, then I am not going to hesitate at all to short this market. Because of this, the market is likely to continue to be very noisy and difficult at times.
