The euro fell a bit against the US dollar during the trading session on Wednesday, as we continue to see downward pressure. The FOMC Meeting Minutes came out later in the afternoon to provide a little bit of a lift against the euro, or perhaps better put, some selling pressure on the greenback - but at the end of the day, selling pressure on the euro has returned. With that in mind, it is likely that we are going to see a further deterioration of the euro itself.
I like the idea of shorting the euro in general, especially on short-term rallies that show signs of exhaustion. Having said that, if we do break down below the candlestick for the trading session on Wednesday, I think that opens up a flood of selling pressure down to the 1.17 level, which was where we were heading to begin with. Breaking down towards that area almost certainly opens up the possibility of a move down to the 1.16 handle as well, and therefore would test a major support level that we have seen more than once.
I believe this is a market that continues to be very choppy to say the least, and with that, I am not interested in buying this market until we get well above the 200-day EMA, which would set sights on the 1.20 level almost immediately. Breaking above that level then opens up the possibility of a move towards the 1.2150 handle, but I think it is becoming increasingly obvious that the US dollar is starting to strengthen in general, and that will almost certainly come into play in this market as well, especially as the euro is considered to be the “anti-dollar.”
I think that this probably continues to be a more or less the trade: simply taking little bits and pieces along the way to the downside. The market looks like it wants to continue following the bond market, meaning that if we continue to see demand for the 10-year note, it is very likely that we will see this market fall as well. Any type of major “risk off event” would also send this market lower, so that being said, I still favor that downside, but I also recognize that we have a lot of noise ahead of us.