We should continue to have a “push/pull relationship” between the two currencies, showing signs of indecision.
The euro initially tried to rally during the trading session on Tuesday to reach towards the 1.2150 level before pulling back again. The end of the day ended up forming a bit of a shooting star, which sits on top of the 50-day EMA. In other words, we are simply going sideways yet again, but it certainly looks as if we have a lot of selling pressure above that will continue to keep the market somewhat suppressed. The candlestick suggests neutrality, but when you look at the entire multiple candlesticks before, we just do not have anywhere to be right now.
If we do break down below the 50-day EMA, then I think the euro will go looking towards the one point to zero level underneath. The one point to zero level underneath extends down to the 1.19 handle as far as structural support is concerned, so I think there are plenty of buyers underneath. However, pay close attention to the 10-year note in America, because it is trying to break out as far as yields are concerned, and that could drive money back into the greenback. We reached as high as 1.30%, which sends alarm bells off for some funds.
On the other hand, if we do break above the 1.22 handle, it would be a very bullish sign and could open up the possibility of a run back towards the highs near the 1.23 handle. Above there, I see a lot of resistance that extends to the 1.25 handle, and I believe that this is a market that is going to be very difficult to get overly excited about, because it is range-bound and has nowhere to be due to concerns about the European Union not been able to get enough inoculations out there, as well as concerns about lockdowns. On the other hand, we have the United States that is likely to have massive amounts of stimulus coming out, and that works against the value of the US dollar. If that is going to be the case, we should continue to have a “push/pull relationship” between the two currencies, showing signs of indecision. I think that will continue to be the case for the next several weeks.