This is a market that I think will run out of momentum to the upside rather soon.
The Euro has rallied a bit during the trading session on Thursday to reach the 50 Day EMA again. Initially, it looks like we would continue selling off, but we have turned around to show signs of strength later in the day. The market continues to pay close attention to interest rates in America, which are starting to drop a bid. That being said, we still have a long way to go before we change the overall trend.
The 50 Day EMA is an indicator that a lot of people pay close attention to, and it has acted as significant resistance previously. If the market were to break above here, then it needs to deal with resistance almost right away at the 1.08 level. The 1.08 level is an area that previously had been supportive, and it now should be resistant. “Market memory” will be a major factor in this area, so I will be paying close attention to this region if we show signs of exhaustion. At that point, I am more than willing to short this market because there are far too many reasons to think that we could continue to see US dollar strength.
When you look at the chart, you can see just how bearish we have been, and therefore one would assume that it is only a matter of time before the sellers return. If we were to break down below the candlestick from Wednesday, that opens up a move down to the 1.06 level, an area that previously had been resistive. That being said, if we do pull back, I would not be surprised at all to see this market go reaching the bottom again. After all, trends happen for a reason, and therefore one would assume that it is only a matter of time before it resumes.
Pay close attention to the interest rates in America, because if they start to rise again, that more likely than not will send this pair lower. The ECB has recently suggested a 25 basis point hike is coming, but that pales in comparison to the 200 basis points of hikes expected out of the Federal Reserve. At this point, it’s been a nice rally but it’s no change in trend, at least not yet. That being said, this is a market that I think will run out of momentum to the upside rather soon.