The euro rallied a bit on Tuesday to reach towards the same highs that we had seen last Friday. When you look at the last couple of candlesticks, we have had a significant inverted hammer, a hammer, and now another inverted hammer/shooting star. In other words, this is a market that is all over the place and has no idea what it wants to do next. The 1.18 level obviously offers a lot of interest, so I would not be surprised at all to see this market dance around that level for the next couple of sessions.
CPI figures in the United States were lower than originally thought, and that is a slightly negative turn of events for the greenback. However, we have given back those quick gains from earlier in the session as the market continues to see a lot of noisy behavior in general. At this point, it looks as if the market has given up on the whole thought process of inflation and is now starting to pay attention to the specific central banks.
When you look at the United States, the Federal Reserve now appears less likely to have to move as quickly as once thought, so that might be part of what we are seeing. To the downside, you should take a look at the European Central Bank, as the market has seen the ECB suggest that a little bit of tapering is to come, but whether or not they raise interest rates would be a completely different story, just as we have seen in Washington DC.
When you look at the chart, you can see that the 50-day EMA is slicing through the shooting star, and of course we have the 200-day EMA above that is sitting at the 1.1879 level. The 1.19 level above there is also an area of significant resistance, so that is worth paying attention to. Although it certainly looks as if we could go higher, there is a lot above that could cause issues. To the downside, if we were to break down below the hammer from the Monday session, then it opens up a move down to the 1.17 handle underneath. I think the only thing you can take away from this is that we will continue to be very noisy.
