I like the idea of using this as an indicator for strength or weakness of both the euro and the US dollar, and trade accordingly against other currencies.
The euro fluctuated on Wednesday ahead of the FOMC statement. This is a market that I think will continue to be driven mainly by the US dollar and not so much by the euro.
As far as trading is concerned, I do not have any interest in necessarily putting money to work here, but I can and often will use the currency pair as a bit of a tertiary indicator as to what is going on with the greenback. The pair acts as a proxy for the US Dollar Index, which can give you an idea as to how to trade the US dollar against multiple currencies. With this being the case, the market is also paying close attention to the 1.17 level, which is an area that I think we will continue to see a lot of noise around. The 1.17 level breaking down would open up the possibility of a move to the 1.16 handle, which is an area where we have seen a lot of support.
For what it is worth, the 50-day EMA is starting to reach towards the 1.18 handle and drift a little bit lower. If we can break down below the 1.18 level with that indicator, that would also open up the possibility of even more bearish pressure. As far as buying is concerned, it is almost impossible to imagine a scenario where I would be comfortable doing so, because this pair is more often than not a complete waste of time. It is more or less an indicator at this point, because so many traders focus on it for US dollar strength. There is lot of high-frequency trading here as well, as the market is going to continue to see a lot of choppy back-and-forth micro movements. As long as that is the case, it is very difficult to get overly engrossed in this market, but I do recognize that the market does have the occasional impulsive move. That being said, I use it as a strength or weakness indicator of not only the US dollar, but the euro as well. You will get more mileage out of a EUR/CAD trade than the EUR/USD pair. In other words, I like the idea of using this as an indicator for strength or weakness of both the euro and the US dollar, and trade accordingly against other currencies.