When you look at the longer-term chart, the previous weekly candlestick was a nasty shooting star right at the 50% Fibonacci level, and now it looks like we have a bit of follow-through.
- The EUR/USD has fallen a bit during the trading session on Friday, as we are hanging around the 50-Day EMA.
- The 1.07 level is a large, round, psychologically significant figure, and an area that people had been paying attention to for some time.
- Because of this, I think you’ve got to look at this through the prism of whether the support will hold. It is interesting that we have found ourselves in this place since at one point it looked like the US dollar was done.
When you look at the longer-term chart, the previous weekly candlestick was a nasty shooting star right at the 50% Fibonacci level, and now it looks like we have a bit of follow-through. In that scenario, it does make a lot of sense that we would see a bit of a pushback, but now it appears that people are finally starting to pay close attention to the idea of the Federal Reserve staying tight for longer, and therefore it will continue to drive the value of the US dollar higher in general.
Looking to Short the Market
With that being the case, I have a proclivity to short this market, but a short-term rally that shows signs of exhaustion will be a shorting signal from what I can see. The 1.10 level above has been a massive barrier, and I think it will continue to be. Because of this, I think we’ve got a situation where we continue to see downward pressure as the standard, but if we were to break above the 1.10 level, then it’s very likely that we could then see the Euro really start to take.
On the other hand, if we take out the 200-Day EMA underneath, then I believe that the Euro could go all the way down to the parity level. That is a rather significant move, but quite frankly we have seen so much in the way of noise in the financial markets over the last year that it would not be surprising at all. The market will continue to be very choppy, so keep your position size reasonable but recognize that there could be a lot of volatility that you need to deal with. I do believe that it is probably only a matter of time before we drop.