- The euro initially did try to rally during the trading session on Thursday but has since been smited pretty hard as we are now approaching the crucial 1.12 level.
- The 1.12 level is an area that I will be looking very closely because I believe it's the gateway to where we are going next.
- Keep in mind that the United States has announced a trade deal with the United Kingdom and they are meeting with the Chinese over the weekend, so that suddenly has the US dollar perking up again.
- If that's going to end up being the case, then the euro is one of the first places you will see US dollar strength.
On a Break Lower
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Breaking down below the 1.12 level on a daily close could open up fresh selling. When you look at the longer term charts, you can see that the euro is most certainly in an area that's been important multiple times in the form of 1.15 going all the way back to 2016 at the very least. So, pulling back from there and dropping for me makes quite a bit of sense.
So, I'm more of a fade the rally type of trader at the moment or shorting the euro on a daily close below that 1.12 level. It just comes down to what your risk appetite is and how aggressive you want to be. At this point, I don't have any interest in buying the euro until we can break 1.16.
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So, I'm leaning to the downside, but I also fully recognize that maybe we get a bounce and go sideways for a while, but you can see this line from the previous session that I had drawn right around 1.13. This is an area here that I think will determine where we go next over the longer term. If we do drop 1.09 it is a very realistic target. After all, the market has shot straight up in the air for a while and sooner or later you either grind sideways or continue to give that back. And I think we're going to give some of that back.
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