The euro initially rallied on Tuesday to reach the 1.06 level but continues to offer a bit of a resistance barrier. Ultimately, as we continue to see a lot of noisy behavior, you should also pay close attention to the interest rate situation in the United States, because as those rates continue to climb, that makes the US dollar attractive. Ultimately, every time the market rallies, there should be sellers coming in to take advantage of the overall trend.
The 1.05 level underneath should be a large, round, psychologically significant figure, and if we were to break down below there, then it’s likely that we will go looking to reach the 1.04 level. The 1.04 level has been important multiple times, especially as we just formed a “double bottom” in that area. If we were to break down below the level, then it is likely that the euro will go to the 1.02 level, perhaps down to the parity level given enough time.
Alternately, if we were to break above the 1.06 level, then it’s likely that we will go looking to reach the 50-day EMA. The 50-day EMA is currently sitting at the 1.0650 level and slipping lower. The market sees a lot of noise above that extends all the way to the 1.08 level. If we were to break above the 1.08 level, then it’s likely that we could change the overall trend. However, I don’t see that happening anytime soon, so I’m not overly worried about it.
The shape of the candlestick for the trading session on Tuesday is a shooting star, so I do think that will come into play to watch whether or not we fall apart. If we were to break down below the bottom of the candlestick, then I think that’s what it will take to see a bit of negative pressure. The euro has recently heard a little bit of noise coming from the ECB that the central bank may do a little bit of tightening, but they are so far behind the Federal Reserve that I think we will continue to see this overall trend play out. Rallies are to be sold into, as there is no real reason to think that anything is going to change.
