The Euro has fallen hard during the course of the trading session on Tuesday to reach down towards the 1.17 level. This is an area that is a round figure, but does not have any real importance attached to it from a longer-term standpoint. In the end, it looks as if we are going to try to go down to the significant support level at the 1.16 handle, an area that has been important more than once. The fact that we are closing at the bottom of the candlestick for the trading session of course is a negative sign as well.
There are a lot of concerns out there when it comes to risk appetite, as yields in America are spiking yet again. With the 10 year Note reaching towards the 1.77% level, this makes the greenback much more attractive. On the other side of the Atlantic Ocean, we have yields in Germany near the -0.34% level, which obviously is much less attractive. Beyond that, we also have to worry about lockdowns and the European economy, as the central bank there has been expanding its purchase program. This drives down yields, and therefore makes the currency a lot less attractive.
To the upside, the 200 day EMA currently sits near the 1.1830 level, an area that previously had been supported. At this point in time, the 200 day EMA should be significant resistance, so any time we get towards that area I would anticipate signs of exhaustion that you can start selling. Nonetheless, this looks like a market that is ready to go much lower, as we continue to see nothing but problems coming out of the EU.
There is a lot of volatility in general, but clearly, we have been negative for a while. Furthermore, we are seeing the US dollar strengthened against multiple other currencies, so this is not just a Euro thing, it is a US dollar related thing. We are seeing the Australian dollar suddenly looked very vulnerable, right along with the New Zealand dollar and even to a lesser extent, the British pound. That being said, this is a market that I think is one that we should be selling signs of exhaustion after short-term pips, or a breakdown below the bottom of the candlestick for the session here on Tuesday.
