The euro broke higher on Wednesday as rumors broke out that perhaps the Russians and the Ukrainians could come to some type of peace agreement. Since then, we have seen a little bit of walking back, so now the question is whether or not there is any hope? The euro rallied as a result, but it is short-term at best. As you can see, the euro tested the 50-day EMA, and even the 1.11 handle before pulling back a bit. This is a market that has been in a downtrend long before the war, and for many other reasons.
The 1.10 level underneath might be the target, but it might also take a little bit of time to get there. If we were to break down below the 1.10 level, then it is possible that we could break all the way down to the 1.08 level. The market has seen a lot of resistance just above, and it has been confirmed during the session on Wednesday. That being said, it is not that anything can be guaranteed, but it certainly looks as if it is an area where we are going to run into trouble.
The area between 1.11 and 1.12 is a huge barrier of resistance, so I do think it makes sense that we would struggle in that region. Ultimately, this is a market that needs to break above the 1.12 level to be impressive enough to start buying. If that were to happen, then it is possible that the euro could go looking towards the 200-day EMA, possibly even the 1.15 handle. That obviously would be a complete change in attitude, but it remains to be seen whether or not that could actually happen.
We are still very much in a downtrend, and that is something that you should keep in the back of your mind. Because of this, I still think that it is easier for the euro to fall than rise, but that does not necessarily mean we will get that move. The US dollar will get strengthened due to more of a “risk-off” type of attitude, or the simple fact that the European economy is a bit of a mess. This is not so much about the dollar at the moment though, it is more about the euro.