The Euro is trying to continue lower, but the Non-Farm Payroll announcement coming out on Thursday could throw a spanner in the works.
EURUSD
The Euro dropped a bit during the early part of the trading session on Wednesday to break below the 1.14 level yet again. I think ultimately the market is trying to gear up to go lower, but I also recognize that we are in an area of hesitation due to the fact that the 1.14 level has been such an important support level for about a year now.
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As we head into the Thursday session, we will get the employment numbers coming out of the United States, and that, of course, has a major influence on what happens with the US dollar. Traders right now at least believe that the Federal Reserve will raise rates twice between now and the end of the year, and I think that is a big driver of where we're at right now.
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If that does not change, then I look at this pair as one that's likely to break down and go looking to the 1.12 level. That does not mean it happens immediately, but I think short-term rallies, especially ones that reach the 1.15 level with signs of exhaustion, are going to invite selling.
The interest rate differential continues to favor the US dollar anyway, and of course, the ECB has already suggested that perhaps they're sitting on their hands. If that ends up being the case, then that puts downward pressure on the Euro, at least against the US dollar, because higher rates could be coming.
I have no interest in buying this pair, at least not right now, but short-term smash and grab rallies are possible for those who trade ultra-short-term charts. Again, I'm looking for exhaustion after a short-term rally to start selling because I do think we have further to go to the downside.
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