The euro went back and forth on Friday as we tried to stabilize after the massive selloff during the Thursday session. By slicing through the 1.12 level, the euro has shown quite a bit of negativity, but at the end of the day this is a market that certainly has shown itself to be decisive to the downside, so I think it is only a matter of time before we can start shorting again.
Rallies at this point will more than likely show signs of exhaustion that we can get negative on, especially near the 1.12 handle which will attract a lot of attention. Even if we break above there, I just do not see an opportunity to get long anytime soon, as the euro will continue to suffer at the hands of the US dollar. After all, the Federal Reserve is looking to tighten monetary policy which makes the US dollar stronger, while the euro has the European Central Bank behind it, looking very unlikely to tighten anytime soon.
It is interesting that the candle ended up forming a relatively neutral shape, because it can be thought of as a bit of a “binary trade.” Having said that, if we break above the top of this candlestick, then we simply wait to find some type of exhaustion. However, if we break below this candlestick, it is very likely that we will aim towards the 1.10 level underneath. I believe at this point we will continue to see a lot of volatility, but that makes a certain amount of sense considering that we have so much in the way of uncertainty around the world, and recently we have seen a rush towards the US dollar as a safety currency. That more than likely will continue given enough time, as the sudden rush to getting away from anything risk related does not look to be letting up in the short term. Ultimately, I do think that we will continue to see a lot of trouble going forward, and it does make sense that we would see further choppy and negative behavior. I do think that the 1.10 level will eventually be targeted, but that is probably going to be a very messy affair all the way down there.
