During the session on Thursday, the market tried to break out and smash through the 1.28 resistance barrier, an area that I have pointed out has being significant. Because of this, the sellers step in and push the market back down. The resulting action form something along the lines of a shooting star, and the market certainly looks as if it’s ready to continue falling from here. I believe that this market will continue to consolidate in this general vicinity, with the upper part of the consolidation area being the 1.28 level, and the lower point of the consolidation area being the 1.25 handle.
The market could go ahead and consolidate in this general vicinity overall, and as a result I think it will continue to offer several short-term selling opportunities. Sooner or later though, we will have to test the 1.25 handle significantly and I think that’s what we’re trying to do at the moment, simply build up enough momentum to break down and continue going lower.
European Central Bank
The European Central Bank is going to have to loosen its monetary policy going forward, and although the Federal Reserve minutes suggested the other day that the Federal Reserve might be further away from tightening than originally anticipated, one of the biggest concerns they have is the European economy. With global concerns, that should push more money into the United States and its bond market, and that certainly should work against the value of the Euro overall.
Besides, the Euro has the misfortune of representing Europe. The European economy continues to be sluggish at best, and deflationary at worst. With that, I believe that the Euro will continue to be sold off in general, and it should probably be a market that continues to drift quite a bit lower heading towards the 1.20 handle based upon longer-term charts, and I believe that every time this market rallies, there will be a significant amount of selling interest entering the currency pair. With that, I am very bearish of the Euro, and believe that this is starting to become a longer-term trend.
