The 1.16 level continues to see a bit of a ceiling being formed in the pair, as we are seeing the dollar strengthen overall.
EUR/USD
The euro has pulled back just a bit during the trading session on Friday as we are hanging around a couple of very important levels. The first one of course is level 1.16, an area that has been important multiple times in the past as both support and resistance and did knock the euro back down during the Thursday session.
Yields and Economic Growth
The fact that we have rolled over from there suggests to me that we may have a little bit of trouble. We also have the 200-day EMA hanging around the same area and that is an indicator that a lot of people will be watching very closely. By pulling back the way we have, this is a market that could go looking to the 1.15 level underneath, maybe even lower, and I do think over the longer term that could very well be what happens here.
There are a multitude of things going on at the same time, not the least of which would be the fact that the yields in the United States continue to skyrocket and that will make the dollar more attractive as traders bet that the Federal Reserve won't be cutting anytime soon. With that being the case and the fact that the ECB is somewhat hawkish but in a holding pattern as well at a lower level, I think over the longer term the weight of this pair just gets to the euro, and we continue to grind lower. I do not think it is a meltdown waiting to happen, I just think that we are probably going to try to work our way towards 1.11 before it is all said and done. Obviously, there are other things out there that could cause a bit of noise as well, for example, you have geopolitical issues that may have people running to the US dollar for safety as well. Europe is going to continue to struggle with energy, so that could weigh upon economic growth in that part of the world.
Potential signal: I am selling here, with a stop loss of 1.1620 and a target of 1.13 for the time being.