The EUR/USD pair went back and forth during the course of the day on Monday, as we continue to show volatility. However, you have to keep in mind that we have recently just broken down below a significant uptrend line, and that of course is a very negative sign. I think that a rally at this point in time could be a selling opportunity at that previous uptrend line, which should now be massive resistance. Keep in mind that the selloff has been rather strong, and as a result it’s difficult to believe that we won’t have more.
The European Central Bank has recently suggested that stimulus is coming, and that means that it’s only a matter of time before they act. With that being the case, the Euro loses value as interest-rate expectations go down. Ultimately, this is the biggest driver of currency markets. However, what further moves this market is global concerns.
Selling rallies
At this point in time, I’m willing to sell rallies as they appear, especially when there are signs of exhaustion above. I think that this market will continue to be somewhat volatile, but ultimately the Federal Reserve is more than likely going to have to raise interest rates after the stronger than expected jobs number last week. With this, money will flood into the US dollar, and as a result I feel that this market is probably going to reach down to the 1.05 level given enough time. That is an area that has more than enough support at it, as it is a large, round, psychologically significant number.
Even if we broke back above the uptrend line, I’m not really sure what it would take to get me to start buying. Perhaps if we get above the 1.11 handle, I might be tempted to start buying, but ultimately it is very difficult as I believe the longer-term pressure is starting to build up to the downside yet again.
