The Euro has gotten hammered during the trading session on Tuesday, as the US dollar gain strength against almost everything. By closing just above the 1.17 level, it looks as if we are going to try to break down through that general vicinity, which has offered quite a bit of support recently. Furthermore, it has been supportive in the past, so if we break down below this level one would have to think that there would be a continuation of selling pressure, opening up the possibility of reaching towards 1.16 level.
The 1.16 level is an area that you have to pay close attention to, because it has been important in the past, but quite frankly is just the beginning of another “zone of support” that extends down to the 1.15 handle, which is a large, round, psychologically significant level, and will cause a bit of a market movement based upon the significance of it. Ultimately, if we were to break down below the 1.15 level it probably opens up the “trapdoor” to lower pricing.
Rallies at this point in time I will treat with suspicion because we have completely wiped out that very bullish Friday candlestick, which looked like it was going to be the beginning of another attempt to get to the 50 day EMA, but if you remember my analysis on that session, I suggested that perhaps we had a very limited upside from there. Little did I know we were going to gap higher on Monday and then just simply start falling from there. Nonetheless, the probabilities are still very much in favor of the greenback at this point, and unless something changes drastically in the risk appetite of traders around the world and the global growth situation, I just do not see how that changes. Chinese economic numbers have been miserable, and retail sales missed in America during the day. Ironically, industrial numbers came out okay, so it just shows how massive the whole situation has been. It turns out you cannot simply lock down the global economy and expected to come back to normal right away. When you look at history, pandemics typically have an economic effect that lasts 3 to 4 decades, in more of a lingering process. I am not necessarily calling for the end of the world, do not get me wrong. However, I think a lot of this talk about how everything is going to be better than it was before is starting to evaporate.
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