Buckle up - it is probably going to be a very difficult couple of sessions, but if we get a little bit of follow-through, this market could drop quite significantly.
The euro sold off quite drastically on Wednesday as we pierced the 1.15 level. Interest rates in America spiked after a miserable 30-year note action, and it looks as if money is flowing back into the greenback. The CPI number was the beginning of major problems for the day, as it was much stronger than anticipated, meaning that inflation in the United States may act against the value of almost everything else.
The size of the candlestick is worth paying attention to, and you should also pay close attention to the fact that we are closing towards the bottom of the range, and that in and of itself is a very negative sign. If we break down below the bottom of this candlestick, it is likely that we will go looking towards the 1.14 level, perhaps even worse than that.
If we turn around and break above the top of the candlestick from the trading session on Wednesday, that would be a huge turnaround, breaking out above the 1.16 level and showing signs of an extraordinarily strong move. At that point, I would anticipate that the entire Forex market would all move against the greenback, and you would have a multitude of opportunities present themselves for you. That being said, the market certainly looks as if it is going to struggle, and I think we would see a move down towards the 1.14 handle, especially if the US Dollar Index continues to stay above the 94.50 level, which is where we had previously seen so much in the way of resistance. At this point, the US dollar has shown extreme amounts of strength, and I think it is only a matter of time before we see a bit of follow-through. The markets look like they are on the precipice of doing something rather ugly, and that quite often can have people looking to the greenback for safety. Buckle up - it is probably going to be a very difficult couple of sessions, but if we get a little bit of follow-through, this market could drop quite significantly. On the other hand, if we get some type of relief rally, it could be just strong. Be very cautious with your position size.