The euro went back and forth on Friday as we continue to see a little bit of hesitation in this area. Ultimately, this is a market that looks as if we are trying to break out, but we gave back some of the gains late during the day, so I think we may have a short-term pullback coming.
That being said, the market breaking down below the 1.14 level could very well end up being an opportunity to see an even deeper pullback. If that is going to be the case, I will be very interested near the 50 day EMA, currently sitting at the 1.1343 level. If we break down below there, then it is possible that we could see a complete reversal, as the interest rates in the bond market of the United States to much higher levels. Ultimately, this is a market that I think is trying to decide whether or not the change of attitude from the European Central Bank over the last week as far as inflation is concerned is going to continue to drive the euro higher. It is very possible, but we have gotten a little bit parabolic at this point in time.
Looking at this chart, I think that we could see a lot of choppiness over the next couple of days, so it is going to be a situation where the day-to-day fluctuations will have to be closely monitored and your position size will have to be somewhat smaller than usual. With this being the case, you should also pay close attention to the fact that the candlestick, although slightly bullish, is more or less somewhat neutral. In other words, it looks like we are struggling to keep up the momentum, and that is normally a sign that we could get a little bit of a pullback. We will have to see whether or not that leads to something a little bit ugly, but I certainly would not be a buyer until we can either break above the top of the candlestick from Friday, or if we get some type of pullback that shows a supportive-looking candlestick. Breaking down below the 50 day EMA would be a very negative turn of events, so quite a bit of caution is needed.
