The Euro initially tried to rally during the trading session on Thursday but gave back the gains as we continue to see a bit of a struggle when it comes to the upward momentum. We have recently tested the 50 day EMA above, as we have just broken down through the 200 day EMA to form the so-called “death cross.” With that being the case, I think it is only a matter of time before we start to reach down towards the 1.1750 level underneath. That was the most recent low, and it certainly looks as if we are trying to get there.
We do of course have the jobs number coming out on Friday, so there will more than likely be a significant amount of volatility just waiting to happen. Quite frankly, it is not until we break above the moving averages that I would consider buying the Euro, and that would only be if we close on a daily chart above there. I suspect that more likely than not we will see a little bit of a bounce before seen selling pressure, perhaps a bit of a “sell on the rallies” type of opportunity given enough time.
All things being equal, this is a market that I think will continue to be very noisy, but it looks as if we are trying to roll over and continue the selling pressure of the last several months. At that point, on a breakdown below the most recent support it is likely that we could go looking towards the 1.16 level underneath, which is support that extends down to the 1.15 handle. This is an area that if we were to test, it is likely that we would see a significant bounce again. Breaking down below that level obviously would be catastrophic for the Euro and probably a major “risk off” type of situation around the world.
To the upside, if we do break above the 50 day EMA and the 200 day EMA, then we will more than likely trying to test the 1.20 handle. That is an area that will cause a lot of noise, and we will have to reassess the entire situation if we get to that region. In the short term, I still believe that fading short-term rallies works.
