If we get some type of major economic shock to the system, then this pair will fall.
The euro has gone back and forth during trading on Tuesday as we continue to see the 1.16 level as a bit of a magnet. The 1.16 level has been crucial more than once, and the fact that we pulled back to that area to find a bit of stability should not be a huge surprise. The area is an area where we have seen both buyers and sellers at previously, so I do think that we continue to see an attempt to rally.
If we can break above the top of the candlestick from the Monday session, that could open up a massive move higher, sending this market towards the 1.1750 level, maybe even as high as 1.18, an area that has been important in the past as well. Obviously, it would take a significant amount of momentum and work to make that happen but at the end of the day it is likely that we will continue our attempt to recover.
The US dollar has been struggling against other currencies, although the euro has been a bit of a laggard. If nothing else, this is a chart that should be followed due to the fact that it is a great proxy for the US Dollar Index, and US dollar relative strength or weakness overall. The euro has its own issues, mainly due to the fact that the European Union continues to see less than ideal economic conditions. Nonetheless, as the reopening trade accelerates, it will more than likely drive money away from the US dollar, so by extension this pair should rally, all things being equal.
That being said, if we get some type of major economic shock to the system, then this pair will fall. I do look at this as a US dollar strength indicator more than anything else, because quite frankly if it falls apart here, then it shows just how weak the euro is and how strong the US dollar has become and should make up ground against other currencies. The market rallying at this point could have me going long, but it more than likely will send me looking to short the US dollar against other currencies such as the Australian dollar or even the British pound as they both seem to have a little bit more in the way of momentum than the euro does overall.