The euro rallied a bit on Friday as we have been bouncing around the same area for the last three days or so. The 50 day EMA above has offered resistance for the last 72 hours, and it is worth noting that we pulled back from that 50 day EMA, as it shows that we are not ready to make a bigger move to the upside. Ultimately, this could be a sign that we are going to continue to consolidate in general.
It is worth noting that the 1.13 level underneath offers short-term support, so if we were to break down below there, then it is likely that we could go lower, perhaps reaching down to the 1.1225 level. This is an area that has been supportive previously as well, so I would pay very close attention to it, because a breakdown below there could open up fresh selling. Keep in mind that this is a pair that is being knocked around by a lot of indecision, something that is going to continue to plague the market.
If we were to turn around and break above the 50 day EMA on a daily close, then it is likely that we will test the 1.14 handle, and then perhaps reach beyond there to test the recent high. Anything above there opens up the possibility of a move towards the 1.16 level above, where we had seen a lot of selling pressure previously. You can see that we fell apart at that general vicinity, and now I would think that it will continue to be difficult to break above. To the downside, if we break down below the 1.1225 level, then it is likely that we will continue to see the euro lose strength, and it is very likely that we could go looking towards 1.10 level underneath.
We did see a little bit of strength in the euro recently due to the fact that the German Bund had started to go positive as far as yield is concerned, something that we had not seen three years. However, this is a market that simply looks like it is ready to continue going sideways more than anything else, so I will simply sit here and wait to see whether we break out above, or if we break that support level underneath.
