The euro initially rallied on Tuesday to show signs of strength, as we had been testing the 1.05 level for support. This is a large, round, psychologically significant figure, and an area where we had previously seen support and resistance. The last couple of days have solidified this, so it looks to me as if the market will continue to respect the 1.05 level.
All of that being said, it is interesting to note that the market had initially tried to rally but then turned around to give up about half of the gains. This suggests to me that we are going to continue to see a bit of hesitation near the 1.06 level, an area that looks to be resistive based on the last couple of sessions. The short-term markets will continue to favor more of a back-and-forth type of action, and if we break above the 1.06 level, then that rally will more than likely be faded as well. After all, the 1.08 level looks to be a bit of a ceiling in the market, and then we have the 50-day EMA above that is starting to fall toward it as well.
Any rally at this point will be an opportunity as far as I can see, and I have any interest in trying to get long of the euro. In fact, it is not until we break above the 1.0933 level that I would be a buyer of the euro, and it would have to be after the Federal Reserve suggests that they are going to be quite a bit more dovish than people anticipated. That would be a complete reversal by the Fed, so I do not necessarily think that is likely to happen anytime soon.
The next 24 hours could be rather quiet followed by a significant amount of negative pressure. The massive downtrend should continue to be a major driver of where we go, so pay close attention to the fact that it takes a lot to turn things around. At this point, I think if you are patient, you should get an opportunity to pick up “cheap dollars” every time we rally. The markets continue to be scared of what the Federal Reserve does, so keep in mind that the press conference could be a major market moving event.
