The Euro rallied a bit during the trading session to slice above the 1.22 level, but then turned around to show signs of weakness as we ended up forming something akin to a shooting star. This initially look like a very bullish day for the Euro but as the 10 year note in America started to sell off, rates went as high as 1.5%, causing all kinds of chaos in the US dollar, ultimately having people jumping back into the greenback.
That being said, there is a lot of support underneath, and I think that the 50 day EMA is also an area that you should be paying close attention to as well, as it is starting to rally. Ultimately, the market should go looking towards the 1.2350 level, and then possibly even the 1.24 level based upon the inverted head and shoulders that we have just tried to peek through and break above the neckline. Ultimately, I think that is what will happen, but we need interest rates in the United States to calm down. The question now is whether or not the Federal Reserve is going to do anything about that, because clearly the traders out there are not willing to do so. In other words, this is a market that I think is starting to run on algorithms, so therefore we need to see the 10 year note stopped selling off in order to see this pair go higher, because the higher yield is attracting people into the US dollar.
That being said, it certainly looks as if this market is trying to go higher and I think given enough time it will. There is massive resistance between the 1.23 level and the 1.25 level above, so a move to the 1.24 level makes quite a bit of sense, especially as we are seen the lots of stimulus coming out of the United States. With that being the question, I think that it is only a matter of time before the dollar gets hit again. However, the bond market needs to calm down a bit before we can truly see some type of bigger move in the Euro against the greenback. Short-term pullbacks probably continue to be the best way to get involved, buying those dips in order to take advantage of what has been a relatively strong trend.
