The euro fell a bit on Wednesday as we awaited the results of the Federal Reserve meeting. It appears that the Federal Reserve was not as hawkish as some people had feared, so it is not a huge surprise to see that the US dollar got beaten back a little bit. Ultimately, this is a market that I think continues to see a lot of noisy behavior just above, so do not be surprised at all to see a move towards the highs of last week, only to see the market pull back again.
Keep in mind that the market is still very much in a downtrend, and even though we have seen a nice recovery, I think that there are still plenty of concerns just above that we have to take advantage of. Looking at this chart, the 1.13275 level above has a significant amount of resistance. That is an area where we have seen the market sell off from multiple times, so if we were to break above that area, it would be a very bullish sign. It would confirm a little bit of a descending triangle, but at this point in time I believe this is a market that is more likely to see sideways action more than anything else. This will be especially true if interest rates have their say, as it looks like the market is probably going to favor the United States over the European Union over the longer term. Ultimately, this is a market that I think needs to recover a bit, only to see whether or not the overall trend has changed. I do not believe that it has, but short-term we may get a little bit of a bounce.
If we can break above the 1.15 handle, then I will be convinced that we are ready to go higher, because it is a psychological victory and would put the 50 day EMA in the rearview mirror. After all, even with the bullish behavior on Wednesday, we are still potentially forming a massive bearish flag. Once the dust settles, we will start to focus on the longer-term outlook again, which to be honest, I think most of what we had seen during the day on Wednesday was simple short covering.