The euro fell again during the day on Friday, but as you can see, has also turned back around late in the day to show signs of stability. So, the question now is whether or not we can reach towards the 200-day EMA or perhaps even taken out to the upside? If it does, that would be a very strong sign that perhaps the euro is ready to rally, and that the markets are starting to look at the statements of Federal Reserve members through the right prism. This is a market that has completely overreacted, as we have thrown a bit of a short-term tantrum.
If we were to break down below the lows of the Friday session, it would be very negative and it would open up a move down to the 1.18 handle, and then possibly down to the 1.16 level. On the other hand, if we were to turn around and take out the 200-day EMA, I think we would go looking towards the 1.20 handle, and clearing that level would reaffirm the potential bullish run.
Unfortunately, I think what we are more than likely looking at is a huge consolidation area for the rest of the summer. I think there are a lot of questions out there as to what the Federal Reserve is really going to do, and one would also have to think that with the weekend behind us, a lot of people would have done a lot of research as to whether or not this is actually the beginning of the end of massive quantitative easing. It has been 13 years, and a lot of the people trading this market right now have never lived through a tightening cycle, professionally speaking.
This is why I think that we will probably just chop around in a very volatile and erratic fashion over the summer, because nobody really knows what to do. That being said, I have a couple of levels that I mentioned previously in this article as to where I would make a decision, and I will stick to that plan for now. It is not until we get that situation that I feel the need to put any money to work.
