The euro rallied a bit on Wednesday as we continue to hang around the 1.16 level. This is an area that has been important multiple times, and I think it is worth paying attention to as it remains a bit of a magnet for price. The euro continues to struggle against the US dollar in relation to so many of the other currencies that I follow, and it makes the euro look rather weak. If the US dollar suddenly takes off in strength, this will be one of the first places you see it happen.
If we were to break down below the lows of the last couple of days, I think we will see this market looking towards 1.1550 level rather quickly, and then perhaps down to the 1.15 handle which is a large, round, psychologically significant figure. The market breaking down below that level could of course open up an even bigger selloff, which would have a lot to do with more of a “risk off attitude around the world” as the US dollar picked up strength.
On the other, if we turn around and take out the highs from the last couple of weeks, namely the 1.1675 handle, then it is likely that we go even higher, perhaps reaching towards the 1.1750 level, and then the 1.18 level after that. The 200-day EMA is currently racing towards the 1.18 handle, so I think that is probably about as high as this market can go, barring some type of massive shift in attitude. If that were to happen, it would be catastrophic for the US dollar on multiple fronts, not just here. I suspect that you would see multiple currencies rally rather decisively, and therefore you would also see commodities do the same.
The shape of the candlestick is the same as we had seen during the previous session, so it shows just how noisy and balanced this market is in this very tight range. At this point, we need to see some type of larger candlestick in order to start following what could be the overall bigger move. This is a market that I think needs to find some type of momentum to get moving. Right now, it looks as if we will struggle to find it.
