The European Central Bank announced during the day on Thursday that perhaps going deeper into stimulus was not completely out of the question. With that being the case, the market looks as if it is reacting negatively to the idea of further quantitative easing as you would expect, causing the Euro to lose value against most currencies. This of course was going to be most clearly seen against the US dollar, and as a result we fell all the way down to the 1.11 level. The 1.11 level is massively supportive as far as I can tell, and with that I feel that the sellers are most certainly testing the limits of support. Ultimately, the market has an uptrend line just below that had been part of the ascending triangle that we have been dealing with on the longer-term charts. If we can get below that, the trend will most certainly continue to go to the downside.
This looks familiar
Having said that, I think the uptrend line will cause quite a bit of support, and as a result I think that we could see a bit of exhaustion when it comes to the selling today. It will be interesting to see how the daily candle closes, because at this point time it would not be surprise at all to see a hammer based upon the uptrend line. At that point in time, I would be a buyer. However, I would wait until we saw some type of daily close and not try to anticipate anything. I recognize that the massive selloff during the session on Thursday is closing at the bottom of the candle, and that is why I feel the market will continue to go a little bit lower. After all, when you close this low in the range, it typically means there’s some type of continuation.
If we break down below the uptrend line, on a daily close, I would be more than willing to start selling. I think rallies will struggle as well, but if we see enough support in this general vicinity, we could have a simple continuation of the overall consolidation. After all, it’s not as if rates were cut, and this is probably one of those situations that is more or less a knee-jerk reaction. I am not trading this pair today, but will most certainly be interested in how the market closes, perhaps leading to my next swing trade.
