The euro rallied during the trading session on Friday but gave back the early gains to form a shooting star. The fact that we are sitting at the 200-day EMA also leads me to believe that this might be a bigger deal. The 200-day EMA is an indicator that a lot of traders will pay attention to for the longer term and I think that we are close to making some type of bigger decision.
If we were to break above the 1.20 handle, then I think it is likely that the euro would go much higher, perhaps reaching towards the 1.2150 level. That is an area that I think shows a lot of resistance, and I think that the market is probably going to lower before it goes higher. If we break down from this area, then I think we could go looking towards the lows again, at least from the last couple of weeks. If we do break down below that level, then it is likely that we will go looking towards 1.17 handle, which could kick off significant selling pressure.
In general, this is a market that I think will be very choppy, and I believe that the next couple of weeks or so will be very interesting for the US dollar, and then by extension the euro. At this point, the market should continue to be noisy in general, so I think keeping your position size small until we get some type of bigger move is probably the best way to go. If we get an impulsive candlestick, then it is obvious as to which direction we are going to break. I believe that the next couple of candlesticks will be very crucial and could give us an idea as to where we will go for a much bigger move.
This is a market that I think could be a big opportunity, but you are going to need to be very cautious about your position size. Given enough time, I believe that this is a market that is most certainly worth watching, if for no other reason than it should give you a bit of a “heads up” as to what is going on with the US dollar.