The euro initially tried to rally on Wednesday but gave back gains most of the day. This was exacerbated once the FOMC kicked off, as it suggests that the interest rate hikes are definitely coming, and that will work in favor of the US dollar against almost everything, including the euro which is considered to be the “anti-US dollar.” With that being said, the market is likely to test the 1.12 level underneath which is a large, round, psychologically significant figure. If we break down below there, the market is likely to go looking towards the 1.10 level.
I do think that is very likely at this point, but it does not necessarily have to be quick. Looking at this chart, it is obvious that we have a lot of negativity out there, and I think we will continue to see downward pressure, although there will be a little bit of noise in the short term. Rallies at this point likely will sell off quite drastically on short-term charts, and I have no interest in buying this market, at least not until we make a huge move, or the Federal Reserve suddenly changes its tune. That being said, the narrative is most certainly about raising rates and the strengthening of the US dollar.
Short-term bounces continue to offer selling opportunities on short-term charts, but if we were to turn around and take out the 50 day EMA, then I would have to start to think about the market changing and perhaps opening up the possibility of a move towards the 1.14 handle. That being said, this is a market that I think certainly looks negative and has been in a downtrend for quite some time, so it does make sense that we would continue this move. Ultimately, I think is much easier to get to the 1.10 level than the 1.15 handle, and I do believe that eventually we will see plenty of reasons to go long of the US dollar and a general “risk off attitude”, so it is likely that we will continue to see plenty of pressure. If you are more of a longer-term swing trader, then simply shorting on the breakdown will probably be the best move.
