The euro initially tried to rally on Tuesday but gave back gains rather quickly. At this point, the euro looks very weak, and it simply seems as if it cannot get out of its own way. Because of this, the market is likely to continue seeing selling pressure at every twist and turn, and if we do get some type of explosive move to the upside, I will simply be looking for an opportunity to short again.
The candlestick for the trading session on Tuesday is an inverted hammer, so if we break above the top of that we may get a little bit of a recovery that we can take a look at. At that point, the 1.14 level should be extreme resistance, and any signs of exhaustion in that general vicinity would be a shorting opportunity from what I see. Ultimately, if we were to break down below the bottom of the candlestick it would signify a continuation of the downtrend, and I think at that point it would open up the possibility of an attack 1.12 underneath. Longer term, the 1.10 level is the target, and I think at that area we would see a lot of support.
We are overextended to the downside though, and that does typically signify that we are going to have to get a bit of a pullback from the downward pressure. The market is likely to continue to offer plenty of opportunities, if you are patient enough to wait for the setup. Regardless, I have absolutely no interest whatsoever in trying to buy this market, because the euro is selling off due to the lockdowns in the EU and the fact that the European Central Bank continues to be ultra-dovish. At the same time, the Federal Reserve is tapering its bond buying purchases and tightening monetary policy. That should continue to favor the greenback, not only here but in multiple currency pairs, so this is just more of the same noise that we had seen in multiple markets. It is not until we break above the 50-day EMA that I would consider buying, and we are light years away from seeing that happen anytime soon. This is a market that I think will continue to be a longer-term selling opportunity, but no market moves in one direction forever.
