The Euro has broken down during the trading session on Thursday after initially trying to turn things around. The inverted hammer from the previous session was the first serious clue that we can break down, and now that we are below the 1.17 level, it is likely that we are going to continue to go towards the 1.16 level underneath which has been major support. Short-term rallies should continue to be selling opportunities from what I can see, especially when you see little bits and pieces of exhaustion on shorter time frames.
Looking at this chart, I do not have any interest whatsoever in trying to get long again, as there is significant resistance, extending to at least the 1.18 level, but I think you probably have to get above the 50 day EMA in order to get long with any type of confidence, and then of course the 200 day EMA would be a lot better.It does not look like we will break above there anytime soon, so I think what we are looking at here is a scenario where we are fading rallies at the first signs of trouble.
Alternately, if we were to break down below the bottom of the candlestick for the trading session on Thursday, then I think as we head into the weekend we are probably going to be selling yet again. The 1.16 level will offer quite a bit of support, so that could be the end of the downtrend, but if we break down below there then we open up the possibility of a move to the 1.15 handle. Breaking the 1.16 level would be a very negative turn of events and you should pay close attention to that.
In general, this is a market that you cannot get too bullish on, at least not until something changes. It looks like the market is trying to price in the Federal Reserve tapering bond purchases, so with that being the case, we are still trying to figure out where we are going to end up in the meantime. Nonetheless, this is a market that still looks negative in the short term so that is how we have to continue to approach the Euro.
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