The 1.16 level is an area that I am watching, as the markets are trying to turn things around, as the markets are moving on risk appetite more than anything else.
EUR/USD
The euro initially pulled back just a bit during the early part of the trading session on Tuesday but then turned around to show signs of life. The 1.16 level is an area that is backed up by the 200-day EMA, so it’s interesting that it is held during the session.
It does look like the risk appetite is starting to come back into the market, and with that being said, the euro may pick up a little bit against the US dollar. There are questions as to whether or not energy is going to be released from strategic petroleum reserves around the world, and if that’s the case, that could get rid of some of the pressure on the European economy.
Potential Relief Rally and Resistance Levels
Nonetheless, I think there is only a matter of time before more chaos breaks out, and if that ends up being the case, the US dollar will probably pick up a little bit of a bid.
A rally at this point in time could reach all the way to the 50-day EMA, which is right at the 1.1743 level. Any bounce towards that area that shows signs of exhaustion will probably end up being selling opportunities.
So, with that in mind, I am looking for that opportunity. I recognize that the market will probably continue to be very noisy, but I think in the short term we may see a little bit of a relief rally.
I am not really ready to buy it myself because there are other currencies that I would rather buy against the US dollar than the euro, but generally speaking, I think we grind a little higher.