This is a market that will be very choppy and sideways, and there is not a lot of clarity when it comes to trading this market.
The euro rallied to break above the previous uptrend line, which should have in theory offered a significant amount of resistance. Now that we have broken back above that uptrend line, is also worth noting that we have cleared the 50-day EMA. It looks like the market is trying to reassert itself to the upside, and perhaps the uptrend line only showed itself to present a “false break down.”
It appears that traders are starting to look at the US dollar through the prism of massive stimulus, and thus the devaluation of the greenback. One of the first places that you see this show up is in the euro, which is considered to be the “anti-US dollar.” If the US dollar continues to be sold off, it is likely that the market will go looking towards 1.22 level above as resistance. If we can break above there, then the euro would go looking towards 1.23 level after that, which has offered significant resistance in the past. Nonetheless, I think the biggest take away from this point is that we are still grinding back and forth between the 1.23 level above and the 1.20 level underneath. The 1.20 level has offered support extending down to the 1.19 level, forming a “zone of support.”
To the upside, I believe that the 1.23 level offers significant resistance that extends all the way to the 1.25 handle above. If we were to break above there, then it would be a huge boost to the upside, perhaps opening up a massive leg higher. I do not think that we will break out above there anytime soon, so I think we will continue to see a lot of back-and-forth trading. I believe this is a market that will be very choppy and sideways, and there is not a lot of clarity when it comes to trading this market. I prefer to trade the euro against currencies other than the US dollar right now. I do think that if we can break above the 1.22 level then it would show a little bit more in the way of clarity. I think we are going to continue to see a lot of difficulty in this market.