- On Monday, the euro rallied rather significantly right off the bat but then turned around to show signs of negativity. At the end of the session, it looks like we will end up forming a shooting star, which of course is a very negative sign. Quite frankly, when you look at the chart, you can see that there is a massive amount of resistance between here and the 1.15 level, as markets are struggling to figure out which direction to run.
- Furthermore, it was Memorial Day in the United States, some liquidity may have been a bit of an issue. Quite frankly, I think that the Europeans could have very well run up the pair during the session but failed to do so. There is a bit of a signal there. That being said, you also have to keep in mind that liquidity being nonexistent in America has a major influence as well so I would not get too far ahead of myself by shorting aggressively.
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However, if we were to break down below the 1.13 level, then it opens up the possibility of a bigger drop lower, down to the 1.12 level, and then the 50 Day EMA. If we were to turn around and break to the upside, then level 1.15 is a major barrier. If we can break above there, then the euro kicks off another leg higher, but right now I just don’t see enough momentum to get overly excited at this point. That being said, this is a market that I think will probably spend more time going sideways than anything else, as we are trying to sort out whether or not momentum is coming back.
Ultimately, a lot of this comes down to the situation between the Americans and the idea of the Europeans coming out of some type of recession, especially in Germany. However, it is worth noting that it’s likely that the Federal Reserve will have to stay relatively tight, so pay close attention to the US bond markets. That being said, the market is likely to continue to be noisy, and at this point in time I do favor the downside, but I also recognize that big moves are probably going to need some type of external pressure.
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