- The Euro has been rather quiet during the trading session on Monday after having an explosive Friday session reaching the 1.16 level.
- The 1.16 level is a large round psychologically significant figure that a lot of people will be paying close attention to.
- The 1.16 level has been important multiple times and what I am seeing around the forex world is that the US dollar isn't necessarily willing to roll over during the day.
At this point we are sitting on top of the 50-day EMA and in and of itself that does make a certain amount of sense that we would see sideways action but if we can break down below here then we could go to the 1.15 level.
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Support Breaking Opens Move Lower to 1.14 Quickly
The 1.15 level being broken through could open up a move down to the 1.14 level. The 1.14 level offered a nice support level. If we were to break down below there, then I think we really see this market fall apart. In that scenario, we would see the US dollar gain against almost everything. With the Euro being a large portion of the US dollar index, I think you've got a situation where you would see other currencies like the Canadian dollar specifically, maybe a few other ones, such as the Australian dollar, New Zealand dollar really taken on the chin.
The dollar has seen a certain amount of negative pressure due to the jobs number, but again, the initial knee-jerk reaction is almost never the correct one. After all, if the United States were to enter a recession, that's going to play havoc with the rest of the world. Ultimately, I think that we are in the midst of trying to change the narrative in the market, and it tends to be a very messy affair. So, watch 1.14 for a breakdown and 1.16 for a rally. That could open up a move to the 1.18 level, which I think at this point in time, you have to look at as the potential ceiling.
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