The euro faces renewed pressure after failing at its uptrend line and 50-day EMA. Analysts favor the U.S. dollar amid global slowdown fears, with key levels at 1.18 resistance and 1.15–1.14 support defining trend direction.
- The euro initially tried to rally during the trading session here on Monday, but to see a bit of resistance at the 50-day EMA and the euro to drop from here is not a huge surprise.
- All things being equal, this is a market that has broken below the uptrend line to show signs of weakness.
- Then it rallied again, but it failed at that uptrend line on Friday. Now it looks like we are dropping from here.
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The FOMC meeting back on the 17th of September was when everybody thought the US dollar was going to capitulate, but we've only seen US dollar strength since then on the whole.
With that being said, this is a market that I think will probably continue to see downward pressure overall, and I do prefer the US dollar over the euro. There are a lot of concerns out there about the global economy, and if it does in fact, slow down, that's not good for the euro. It typically is good for the US dollar because we will see people running into the US Treasury market.
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In fact, yields are dropping overall, and if that's going to be the case, you could see a situation where people continue to throw money at treasuries, therefore strengthening the US dollar. We'll just have to wait and see. Ultimately, I think you have a scenario where we continue to see a lot of noisy behavior. But I think right now we are trying to determine whether or not this massive uptrend stays intact.
Or do we have a situation where maybe, just maybe, we have a little bit of sideways action that eventually gets repudiated, and we end up seeing a lot of traders out there work off some of the excess froth. Really, at this point, though, I think you have to be cautious about getting overly aggressive to the upside here, at least not until we can clear the 1.18 level.
If we were to break down below the 1.15 level, then it opens up a move to the 1.14 level. That's where the 200-day EMA is. And that 200-day EMA being broken and violated to the downside is literally the sign that we're in a downtrend. I think at this point in time, we are in the process of changing structure. The question now is, was Friday a lower high because we've already made a lower low.
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