The euro fell a bit during the trading session on Friday to reach down towards the 50-day EMA. However, by the end of the day, we had bounced quite nicely to show that there is still plenty of demand for the euro going forward. This is a market that I think will end up going to the upside yet again, due to the fact that stimulus in the United States is all but a foregone conclusion as Democrats are willing to use “reconciliation” in order to force through the $1.9 trillion. That, in theory, should lift currencies against the greenback, as stimulus tends to work against the value of the currency.
Furthermore, the idea is that there is going to be a massive reflation trade around the world, which tends to be negative for the US dollar as well. That is the opposite of the euro, as the euro tends to be thought of as the “anti-dollar.” This is a market that I think will probably look towards the 1.22 level, but we obviously have a bit of noise between here and there. Short-term pullbacks should be seen as offering value, especially with the 1.20 level underneath that could come into play. The 1.20 level extends up to the 1.19 level for support, just as the 1.23 level above is significant resistance that extends all the way to the 1.25 handle. In other words, we are stuck in a major consolidation range, but that is nothing new for the euro, which tends to be very choppy to say the least.
Massive amounts of stimulus coming out the United States could continue to weigh upon the US dollar in general, and if that is going to be the case, then by extension, the euro should be a better performer in turn. The euro does have to deal with the idea of the lockdowns in the European Union and the poor vaccination rollout that we have seen. The market continues to see choppy volatility, but for the next couple of months, I fully anticipate that we will stay in this 300-point range, leading to range-bound opportunities more than anything else. I have no interest in trying to short this market down at this low level.
