The euro gapped a bit lower on Friday, as we saw a little bit of a short squeeze during low volume on Friday. You can see that there is a significant amount of resistance just above, at the very least in the form of the bottom of the previous downtrend channel. If that is going to continue to be the case, then I think it makes sense that we will sell off here. Signs of exhaustion will be sold into as well, as it could give us a way to pick up a little bit of value when it comes to the greenback.
The massive candlestick on Friday was probably a bit misleading, due to the fact that the volume was very light. It was the day after Thanksgiving, so all of the New York banks were AWOL. With this being the case, think it is only a matter of time before we would see sellers on any rally, and I would like to see a bigger rally from which to start shorting. I would be very interested in anything near the 50-day EMA, but it is all the way up the 1.15 level, so it is going to take a significant push to get close to it. In the meantime, I will look for exhaustion as an opportunity to start shorting again, because the European Union is in a completely different realm of reality than the rest of the world, so I do believe it will continue to be particularly vulnerable.
Adding to that the fact that Austria is locking itself down, and Germany is starting to talk of similar remedies, and it makes sense that the euro would get smoked against almost everything, especially the greenback, which is considered to be the “antithesis” of the currency. Beyond that, the US economy continues to roar ahead, so that helps the greenback as well. Finally, you have to take a look at the interest rate differential which continues to widen, and as long as that is going to be the case, it makes sense that the euro will continue to lose ground to the US dollar going forward.
