The Euro pulled back just a bit during the trading session on Monday to reach below the 1.19 level but has since then turned around to show signs of support again. This is an area that is important, due to the 50 day EMA and of course the previous uptrend line. Furthermore, the market is currently stuck between the 50 day EMA and the 200 day EMA, causing a bit of a “squeeze” in the market.
The candlestick is a little bit of a hammer, although I would not get overly excited, as the market has shown itself to be rather choppy and difficult to deal with. Furthermore, the market is likely to see the choppy behavior continue to play this market, and of course the 50 day EMA typically causes a lot of interest. If we were to turn around a break down below the 200 day EMA, then it is likely to continue going lower, perhaps reaching down to the 1.16 level. That is an area that begins significant support extending down to the 1.15 handle, so it would make a certain amount of sense that we may stop down there.
However, if we were to turn around and break above the 50 day EMA, it could open up the possibility of a move towards the 1.20 level. Breaking above there then would be wildly bullish for the Euro as it would be a complete turnaround of the recent selling pressure. Furthermore, the interest rates in America continue to outperform the European Union, so eventually it should continue to mean a lot of upward pressure on the greenback itself. Because of this, I think it is probably only a matter of time before we sell off, but we obviously do not have that signal at the moment.
In the short term, I think we will probably just chop back and forth right around the 1.19 level, as we work our way through earnings season on Wall Street as well. I am waiting for some type of impulsive candlestick that I can take advantage of, but right now it looks like the market is more than willing to simply kill time. When we finally do get a bigger candlestick, then it will let us know which target we should be aiming towards.
