The euro rallied initially on Friday but continues to find massive amounts of selling pressure above. In fact, the market had dropped below the 1.1750 level rather rapidly, suggesting that we have much further to go. At this point, the market looks as if it is going to go down to the 1.17 level underneath, which is a large, round, psychologically significant figure. I think that is probably the next move we are getting ready to see, as the market has been negative.
As things stand right now, the 1.18 level has offered a significant amount of resistance during the day, and I think we will continue to slump lower. Furthermore, if the markets continue to fear a lot of different things out there, it is likely that the US dollar will continue to strengthen at the expense of the euro, and perhaps all the other major currencies. Ultimately, this is a market that I think will continue to see a lot of trouble every time it tries to rally.
If we did turn around, it is not until we take out the 50-day EMA to the upside that I would consider getting long, and even then, I would anticipate a lot of noise right around the downtrend line that is also backed up by the 200-day EMA. Breaking above all of that could send this market much higher, but obviously it would take quite a bit of a change to make that happen. If that were to happen, it would be a complete change in the US dollar against multiple currencies, but at this point I think it is much more likely that we will drop towards the 1.16 handle. That is an area that had been massive support previously, so I think it all comes together to offer a nice target, as well as a potential turnaround.
As long as the interest rate differential between the United States and the European Union favors the Americans, that will favor the US dollar overall. This is especially true as people are starting to worry about the global supply chain and the troubles with lockdowns and the like. That being said, the market certainly looks as if trouble continues to be a major player in this currency pair.
