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Euro vs US Dollar Technical Analysis
The euro initially rallied during the trading session on Wednesday, but pulled back a bit at this point. All things being equal, the market looks as if it continues to see plenty of downward pressure, which makes quite a bit of sense considering the overall risk aversion that we have seen for most of the last several months. The US dollar of course is a safety currency, and therefore it makes a lot of sense that people would run toward it.
Furthermore, there is a huge interest rate differential between the 2 currencies, and therefore you get paid to be short of the market, therefore, I think it is probably only a matter of time before we see further downward pressure. The 1.05 level underneath is a large, round, psychologically significant figure, which of course people will pay close attention to. If we were to break down below there, then the market is likely to go much lower. At that point, the euro is likely to reach toward the 1.0250 level. Underneath there, then you have the parity level, which of course will attract a lot of attention in and of itself.
On the chart, I have a bearish flag marked out and I do think that most traders out there see this. Because of this, it’s probably only a matter of time before technical traders really start to press the issue as well. At the top of the flag, you have the 50-Day EMA indicator offering a significant amount of resistance. So technical traders would also pay attention to that as a potential “ceiling” going forward.
Ultimately, this is a market that has been negative for some time, and this recent consolidation is probably just going to end up being simple consolidation before a plunge. That being said, keep in mind that the market has been choppy for the most part, you should pay close attention to it and recognize that longer-term trades are going to be difficult to come by at the moment. However, we will eventually break down through the bottom of the flag if the technical analysis plays out, and that should bring in quite a bit of momentum.
For a look at all of today’s economic events, check out our economic calendar.
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