- The initial reaction of the EUR/USD to the jobs number in the United States was bullish, but by the time everybody went home for the weekend, it started selling it off again.
- Because of this, it looks like a breakdown is probably inevitable, and lower pricing is almost certain.
- Rallies now continue to be selling opportunities from everything I see, and therefore I do not trust short-term upward movement.
The 1.01 level has offered a significant amount of resistance during the day, as well as earlier this week. Furthermore, the 1.02 level has offered a lot of resistance, so I think you must keep that in mind as well. The 50 Day EMA is raising toward the recent consolidation area as well, so I think there are a lot of different things lining up to cause issues. In fact, it’s not until we break above the 1.05 level that I would take a rally in the Euro seriously.
Europe Heading Towards a Recession
This winter, we are more likely than not going to see Europe struggle with energy issues, and as a result we could very well see the European economy enter a massive recession. In fact, some pundits are even talking about a small depression. Regardless, it’s difficult to imagine that the Euro is going to be more desirable than the US dollar, especially as the Federal Reserve continues to tighten monetary policy. In this scenario, it’s essentially a “one-way trade”, but the bottom has yet to be figured out. The next move lower will be down to the 0.98 level, and then possibly down to the 0.96 level.
At one point during the initial reaction against the jobs number, and look like the Euro was going to break out and start a relatively big move. However, it was quickly squashed around noon in the New York time zone, and the bottom fell out. I think you will continue to see this type of action going forward, but it is probably worth noting that Monday is Labor Day in the United States, meaning that liquidity might be an issue later in the day. Longer-term, this remains a “sell the rally” type of situation that just does not seem to be showing any signs of letting up anytime soon. Ultimately, this is a market that looks about as poor as it can.
Ready to trade our Forex technical analysis? Here are the best Forex brokers to choose from.