The euro rallied significantly on Friday, only to give up a bit of the gains. There is a lot of volatility in the market right now, and as you can see, the market is sitting just above the 1.16 handle. The 1.16 handle is an area that has been important multiple times, so it is not a huge surprise to see that we are basically sitting just above there. The fact that we gave up gains later in the day was possibly a function of the US dollar spiking after Federal Reserve Chairman Jerome Powell suggested that tapering was still something that had to be done.
It was a bit of a surprise that sent the market into a tizzy, but at the end of the day it is what happened. The candlestick shows signs of exhaustion for the Friday session, and it does seem as if there is a lot of resistance just above. We have seen this all week, showing signs of hesitation just below the 1.17 level. The 50-day EMA sits there as well, so I think all of this combined will suggests that the euro will continue to struggle.
If we were to break above the 1.17 level, then it is likely that we could go looking towards the 1.18 level. That would obviously be part of a very negative market for the greenback, and you would probably see the US dollar lose value against other currencies as well. I do not necessarily like trading the euro, but I do use its chart as an indicator for US dollar relative strength or weakness. The market has been in a downtrend for a while, and it still is, despite the fact that we have seen a little bit of a bounce. This market will continue to be very noisy, and focus on the fact that the interest rate differential between the two economies still favors the United States. The market has bounced like this more than once, so even though we have had a bit of a rally, I do not know how much that says about the euro in general. The market will continue to see a lot of noise, and I think that is how you have to approach it.
